5th September 2013
Sub:
General Guidelines for dealing with Conflicts of Interest of Intermediaries,
Recognised Stock Exchanges, Recognised Clearing Corporations, Depositories and
their Associated Persons in Securities Market.
Trading members are hereby informed that SEBI, vide
circular No. CIR/MIRSD/5/2013 dated August 27, 2013 has provided general
guidelines on Conflicts of Interest of Intermediaries, Recognised Stock
Exchanges, Recognised Clearing Corporations, Depositories and their Associated
Persons in Securities Market. The contents of the
said Notice are reproduced hereunder for information of trading members.
Quote:
1. All intermediaries, recognised stock exchanges,
recognised clearing corporations and depositories (hereinafter collectively
referred to as "such entities") are presently governed by the
provisions for avoidance of conflict of interest as mandated in the respective
regulations read with relevant circulars issued from time to time by SEBI. On
the lines of Principle 8 of the International Organisation of Securities
Commissions (IOSCO) Objectives and Principles of Securities Regulations, it has
been decided to put in place comprehensive guidelines to collectively cover
such entities and their associated persons, for elimination of their conflict
of interest, as detailed hereunder.
2. Such entities shall adhere to these guidelines for avoiding or
dealing with or managing conflict of interest. They shall be responsible for
educating their associated persons for compliance of these guidelines.
3. For the purpose of these guidelines "intermediaries" and
"associated persons" have the same meaning as defined in Securities
and Exchange Board of India (Certification of Associated Persons in the
Securities Markets) Regulations, 2007.
4. Such entities and their associated persons shall, i. lay down,
with active involvement of senior management, policies and internal procedures
to identify and avoid or to deal or manage actual or potential conflict of
interest, develop an internal code of conduct governing operations and
formulate standards of appropriate conduct in the performance of their
activities, and ensure to communicate such policies, procedures and code to all
concerned;
ii. at all times maintain high standards of integrity in the conduct of
their business;
iii. ensure fair treatment of their clients and not discriminate
amongst them;
iv. ensure that their personal interest does not, at any time
conflict with their duty to their clients and client’s interest always takes
primacy in their advice, investment decisions and transactions;
v. make appropriate disclosure to the clients of possible source or
potential areas of conflict of interest which would impair their ability to
render fair, objective and unbiased services;
vi. endeavor to reduce opportunities for conflict through prescriptive
measures such as through information barriers to block or hinder the flow of
information from one department/ unit to another, etc.;
vii. place appropriate restrictions on transactions in securities while
handling a mandate of issuer or client in respect of such security so as to
avoid any conflict;
viii. not deal in securities while in possession of material non
published information;
ix. not to communicate the material non published
information while dealing in securities on behalf of others;
x. not in any way contribute to manipulate the demand for or supply of
securities in the market or to influence prices of securities;
xi. not have an incentive structure that encourages sale of products
not suiting the risk profile of their clients;
xii. not share information received from clients or pertaining to them,
obtained as a result of their dealings, for their personal
interest;
5. The Boards of such entities shall put in place systems for
implementation of this circular and provide necessary guidance enabling
identification, elimination or management of conflict of interest situations.
The Boards shall review the compliance of this circular periodically.
6. Such entities shall conduct assessment of their existing policies on
conflict of interest in a time bound manner, not later than 6 months from the
date of this circular and bring them in line with the requirements of these
guidelines.
7. The said guidelines shall be in addition to the provisions, if any,
contained in respective regulations/ circulars issued by the Board from time to
time regarding dealing with conflict of interest, in respect of such
entities.
8. This circular is issued in exercise of powers conferred under
Sections 11 of the Securities and Exchange Board of India Act, 1992 to protect
the interests of investors in securities and to promote the development of, and
to regulate the securities market.
9. This circular is available on SEBI website (www.sebi.gov.in) under
the categories “Legal Framework” and “Circulars”.
Yours faithfully,
Ruchi Chojer
General Manager
Phone No. 022-26449310
Email id: ruchic@sebi.gov.in
Unquote
Trading Members are requested to take note of the aforesaid
guidelines of SEBI and act accordingly
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