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GuideForInvestors-BSE

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Introduction

Bombay Stock Exchange Limited established in 1875 as the "Native Share and Stock Brokers' Association" is one of the oldest stock exchanges in Asia. The Exchange not only provides an efficient market but also upholds the interests of the Investors' and ensures redressal of their grievances, whether against the companies or its Member-brokers. It strives to educate and enlighten the Investors' by making available to them the necessary information. The Exchange popularly known as the Bombay Stock Exchange (BSE) provides all the market related information by issuing press release and these are also available on the website (i.e.www.bseindia.com).

Investor's Service Cell

Protecting the interest of Investors' dealing in securities is one of the main objectives of the Exchange. In pursuit of this objective, an Investors' Services Cell (ISC) was set up in 1986 by Bombay Stock Exchange (BSE). The grievances of Investors against listed companies and members of the Exchange are redressed by the Exchange. The Exchange also assists in arbitration process both between Members & Investors. The capital market can grow only when the Investors'find it safe for them to invest in the capital market and they are assured that the rules governing the market are fair and just to all the players in the market.

With a view to ensure speedy and effective resolution of claims, differences and disputes between nonmembers , the Exchange has laid down a set of procedures for arbitration thereof. These procedures are duly embodied in the Rules, Bye-laws and Regulations of the Exchange, which have been duly approved by the Government of India / Securities and Exchange Board of India(SEBI).


Safeguards' for Investors'

These are some of the safe-guards that needs to be adhered to by the Investors' before trading in the securities market.

1. While Selecting the Broker/ Sub-Broker

• Deal with only SEBI registered Broker / Sub-broker after due diligence. Details of List of Brokers' can be procured from the Member's List published by the Exchange and from the website:www.bseindia.com

2. Enter into an Agreement

• Fill in a Client registration form with Broker / Sub-broker

• Enter into Broker / Sub-broker's Client Agreement. This agreement is mandatory for all Investors for registering as a client of a BSE Trading Member. The Client should ensure the following before entering into an agreement:

Carefully read and understand the terms and conditions of the agreement,before executing the same on a valid stamp paper of the requisite value.

Agreement to be signed on all the pages by the Client and the Member or their representative who has the authority to sign the agreement. Agreement has also to be signed by the witnesses by giving their name and address.

3. While Transacting

• Specify to the Broker / Sub-broker, Exchange through which your trade is to be executed and maintain separate account per Exchange.

• Obtain a valid Contract Note (from Broker) / Confirmation Memo (from Sub-broker) within 24 hours of the execution of the trade.

Contract note is a confirmation of trade(s) done on a particular day for and on behalf of a client in a format prescribed by the Exchange. It establishes a legally enforceable relationship between the Member and Client in respect of settlement of trades executed on the Exchange as stated in the Contract note.

Contract notes are made in duplicate, and the Member and Client both keeps one copy each. The Client are expected to sign on the duplicate copy of the contract note for having received the original.

Contract Note-Form A: Contract Note issued where Member is acting for constituents as brokers and agents.

Contract Note-Form B: Contract note issued by Members dealing with constituents as Principals.

Confirmation Memo-Form C: Confirmation Memo issued by registered Sub-brokers acting for Clients / Constituents as Sub-brokers.

• Ensure that the Contract Note / Confirmation Memo contains:

SEBI registration number of the Member/ Sub-broker.

Details of trade such as, Order no, trade no., trade time, quantity, price, brokerage, settlement number, details of other levies.

The trade price should be shown separately from the brokerage charged.

As stipulated by SEBI, the maximum brokerage that can be charged is 2.5% of the trade value. This maximum brokerage is inclusive of the brokerage charged by the sub-broker (Sub-brokerage cannot exceed 1.5% of the trade value.) Any additional charges that the member can charge are Service tax @5% of the brokerage and any penalties arising on behalf of client (Investor).

The brokerage and service tax is indicated separately in the contract note.

Signature of authorised representative.

Arbitration clause stating that the trade is subject to the jurisdiction of Mumbai must be present on the face of the Contract note.

4. Ensuring Settlement.

• Ensure delivery of securities /payment of money to the broker immediately upon getting the contract note for sale / purchase but in any case, before the prescribed pay-in-day.

• The Member should pay the money or securities to the Investor within 48 hours of the payout.

• Open demat account.

• Preferably opt for buying and selling demat shares.

• For delivery of shares from Demat a/c, give the Depository Participant (D P) 'Delivery out' instructions to transfer the sames from the beneficiary account to the pool account of broker through whom shares and securities have been sold.
The following details to be given to the DP: details of the pool a/c of broker to which the shares are to be transferred, details of scrip, quantity etc. As per the requirements of depositories the Delivery out Instruction should be given atleast 48 hours prior to the cutoff time for the prescribed securities pay-in.

• For receiving shares in your Demat a/c, give the Depository Participant (D P) 'Delivery in' instructions to accept shares in beneficiary account from the pool account of broker through whom shares have been purchased.

• If physical deliveries are received - check the deliveries received as per Good/Bad delivery guidelines issued by SEBI.

• Bad delivery cases should be sorted out through Exchange machinery immediately.

• All registration of shares for ownership of physical shares should be executed by a valid, duly completed and stamped transfer deed.

Rights of Investors
  1. To receive all benefits/ material information declared for the Investors' by the Company.
  2. Prompt Services from the Company such as transfers, Sub-divisions and consolidation of holdings in the Company.
  3. Equity holders have a right to subscribe to further issue of Capital by the Company.
  4. Brokerage not to exceed 2.5 per cent of the Contract Price.
  5. Receipt of the Contract note from the broker in the specified format showing transaction price and brokerage separately.
  6. Investors can expect delivery of shares purchased/value of shares sold within 2 days after the pay-out day.
  7. Access to the Exchange arbitration facilities in case of dispute with brokers.Contact : The Investors' Service Cell, The Stock Exchange, 1st Floor , Rotunda Bldg, Mumbai - 400 001
  8. For complaint against listed Companies/brokers contact: The Investors' Service Cell, The Stock Exchange,1st Floor, Rotunda Bldg, Mumbai - 400 001.
General Do's and Don'ts for Investors
  1. Don't deal with unregistered intermediaries, as this would expose you to counter party risk.
  2. Give clear and unambiguous instructions to your Broker / Sub-broker.
  3. Keep a record of all instructions issued to the Broker / Sub-broker.
  4. Confirm with your Broker / Sub-broker whether delivery is in physical or demat form before selling shares.
  5. Don't fall prey to promises of unrealistic high returns.
  6. Don't indulge in speculative trading, go by fundamentals.
  7. Trade within your predetermined limits.
  8. Use the Investors' Grievance Redressal system of the Exchanges to redress your grievances if any.
  9. Understand the working of the Investor Service Cell for complaint against listed companies / Brokers.
  10. You can trade on your own through Internet based trading by registering with a Broker.
Process of solving investors grievances

BSE has established a full-fledged Investors' Services Cell (ISC) to redress Investor's grievances. Since its establishment in 1986, the Cell has played a pivotal role in enhancing and maintaining Investors' faith and confidence by resolving their grievances either against listed companies or against Members of the Exchange. The services offered by the ISC are as under :

Investor's Grievances Against Listed Companies

ISC forwards the Complaints to the respective company and directs them to solve the matter within 15 days. In spite of the above efforts, if the company fails to resolve the Investor's Complaints and the total no. of pending complaints against the company exceed 25 and if these complaints are pending for more than 45 days , after issue of show cause notice for 7 days the Scrip of the company is suspended from trading till grievances are resolved. ISC also transfer's such Scrip's to Z category for non-resolution of Investors' Complaints.

ISC takes many other pro-active measures to resolve the Investor's grievance such as:

Calling the Company representative to the Exchange to interact with Investor's / Members to resolve the complaints.

Calling major Registrar & Transfer agent to the Exchange to interact and resolve the grievances of the Investor's and Members of the Exchange.

Issuing monthly press release listing top 25 companies against whom maximum complaints are pending for resolution. The same is also released on the website of the Exchange.

Pursuing Mumbai based companies to depute their representative to the Exchange to take the pending list of complaints & resolve the same immediately.

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Investor's grievances against Member's

The nature of complaints received by the Exchange can be broadly classified into the following categories:

Non-receipt of delivery of shares/ Non removal of objection/Non-receipt of sale proceeds of shares/ Non-receipt of dividend/ Non-receipt of Rights, Bonus shares

Disputes regarding Rate Difference

Disputes relating to non-settlement of Accounts

<0>Miscellaneous Items

The complaints are forwarded to the concerned members to reply /settle the complaints within 7days from the receipt of the letter. If no reply is received or reply received is not satisfactory, the matter is placed before the IGRC (Investor's Grievance Redressal Committee) headed by Retd. High court Judge. IGRC is constituted by the Governing Board to resolve the Complaints of non-members against Members through the process of reconciliation. The parties are heard and the matter is tried to be solved amicably or it is referred for Arbitration under the Rules, Bye-laws & Regulations of the Exchange.

Arbitration

The Investors complaints referred by IGRC can be against the (i) active members of the Exchange as well as the (ii) defaulter-members of the Exchange. The process of solving the Investors complaints through the arbitration procedure are as mentioned below:

Arbitration Procedure

For the purpose of resolution of grievances between Investors and Member-brokers, the Exchange has constituted an Arbitration Committee with the approval of SEBI.

The non-member arbitration panel consists of retired High Court and City Civil Court judges, Chartered Accountants, Company Secretaries, Solicitors and other professionals having in-depth knowledge of the capital market.

On receiving the direction for arbitration from the IGRC, the complainant (applicant) files relevant supporting documents for arbitration. A set of the arbitration documents is sent to the other party (respondent) for giving his counter reply.

After completion of the formalities, the matter is fixed for hearing before arbitrators. For claims less than Rs.10 lakhs, the applicant has/have to propose the name of three arbitrators and the respondent(s) has/have to consent on the name of one of the arbitrators. In case the respondent(s) does/do not consent on the arbitrator, the exchange appoints the arbitrator to adjudicate the matter. For claims above Rs.10 lakhs, a panel of three arbitrators, one each to be appointed by the applicant(s) and respondent(s) and the presiding arbitrator has to be appointed by the exchange to adjudicate the matter.

The date for hearing is fixed and the concerned parties are informed about the date through notices. After hearing both the parties and taking the submissions and the documents on record, the arbitrator(s) close the reference and the award (decision) is given.

Appeal

If the applicant is not satisfied with the award he can appeal against the same in the Exchange within 15 days of the receipt of the award. The appeal bench of five arbitrators hears the matter and gives the award.

However, the aggrieved party has to deposit the awarded amount given by the Arbitral Tribunal with the Exchange unless and until the appeal bench exempts it partly or wholly.

If the award is in favour of the applicant, the active member has to abide by the decision. If he fails to abide by the award, the Disciplinary Action Committee (DAC) takes necessary action against him. The award becomes a decree after three months from the date on which it is given and can be executed as a court decree through a competent court of jurisdiction. The same can be challenged only in the High Court of Judicature, Mumbai.

Arbitration Procedure against Defaulter Member of the Exchange

Any complaint against defaulter Members of the Exchange can directly be filed in arbitration. However the same has to be filed within 6 months from the date of declaring the Member as defaulter by the Exchange. The rest of the process is the same as above.

An award obtained against a defaulter member are scrutinized by the Defaulters committee (DC), a standing committee constituted by the Exchange, to ascertain their genuineness, etc. The awarded amount or Rs.10 lakhs whichever is lower is paid from the Customer's Protection Fund (CPF). After the approval of the DC & Trustee of CPF, the amount is distributed to the clients who have obtained the award against defaulter member.

Investor's or Customer's Protection Fund

BSE is the first Exchange to have set up the 'Stock Exchange Customer's Protection Fund in the interest of the customer's of the defaulter members of the Exchange. This fund was set up on 10th July, 1986 and has been registered with the Charity Commissioner, Government of Maharashtra as a Charitable Fund. BSE is the only Exchange in India, which offers the highest compensation of Rs.10 lakhs in respect of the approved claims of any Investor against the defaulter members of the Exchange.

The members at present contribute contribute Rs.1.50 per Rs.10 lakhs of turnover. The Stock Exchange contributes 2.5% of the listing fees collected by it. Also the entire interest earned by the Exchange on 1% security deposit kept by with it by the companies making public / rights issues is credited to the Fund.

Trade Guarantee Fund

In order to introduce a system of guaranteeing settlement of trades and ensure that market equilibrium is maintained in case of payment default by the Members the Trade Guarantee Fund was constituted and it came into force with effect from May 12, 1997. The main objectives of the fund are as given below:

1. To guarantee settlement of bonafide transactions of members of the Exchange inter se which form part of the Stock Exchange settlement system, so as to ensure timely completion of settlements of contracts and thereby protect the interest of Investors and the Members of the Exchange.

2. To inculcate confidence in the minds of secondary market participants generally and global Investors', particularly to attract larger number of domestic and international players in the capital market.

3. To protect the interest of Investors' and to promote the development of and regulation of the secondary market.

The Fund is managed by the Defaulters' Committee, which is a standing Committee constituted by the Exchange, the constitution of which is approved by SEBI.

Investor Awareness & Education
Investor Awareness Program

Investor Awareness programs are being regularly conducted by BSE to educate the investors and to create awareness among the Investors regarding the working of the capital market and in particular the working of the Stock Exchanges. These programs have been conducted in Gujarat, Kerala, Tamilnadu, Uttar Pradesh, Rajasthan, Punjab, Haryana and within Maharashtra.

The Investor Awareness program covers extensive topics like Instruments of Investment, Portfolio approach, Mutual funds, Tax provisions, Trading, Clearing and Settlement, Rolling Settlement, Investors' Protection Fund, Trade Guarantee Fund, Dematerialisation of shares, information on Debt Market, Investors' Grievance Redressal system available with SEBI, BSE & Company Law Board, information on Sensex and other Indices, workshops and Information on Derivatives, Futures and Options etc.

The Bombay Stock Exchange has also earmarked an amount of Rs.1 crore for assistance to Investor Associations for conducting Investor Awareness and education seminars etc. During the year 2000-2001 an amount of Rs.20 lakhs has been disbursed to the SEBI recognized Investors Association.

Further, for the benefit of the Investors' the Bombay Stock Exchange has :

1. BSE Training Institute which organises Investor Education programs periodically on various subjects like comprehensive program on Capital Markets, Fundamental Analysis, Technical Analysis, Derivatives, Index Futures and Options, Debt Market etc. Further, for the Derivatives market BSE also conducts the compulsory BCDE certification for members and their dealers to impart basic minimum knowledge of the derivatives markets. For any enquiries Contact : The Training Institute, 21st Floor, P.J.Tower, Dalal Street, Mumbai - 400 001.

2. BSE's official Website www.bseindia.com which is the focal point for information dissemination and updates Investors with the latest information on Stock Markets on a daily basis through real time updation of statistical data on Market activity, corporate information and results. Educative articles on various products and processes are also available on the site.

3.Publications: BSE regularly comes out with publications for Investor education on various products and processes like Quick reference guide for Investors .