Revised Penalty Structure w.r.t. Unauthorised trades executed in the clients’ account

• Notice No: 20231121-12
• Notice Date: 21 Nov 2023
• Category: Others
• Segment: General

This is in partial modification to Exchange Notice No. 20180214-31 dated February 14, 2018 and 20210324-45 dated March 24, 2021 specifying the penalty norms for unauthorized trades executed by the members in the account of client.

As per SEBI circular dated July 31, 2023, new Online Dispute Redressal (ODR) has been introduced by SEBI wherein the existing mechanism of complaint redressal through IGRC has been discontinued and a Conciliation process through Conciliator has been introduced w.e.f. August 16, 2023.

The Exchange has now reviewed the said penalty norms and revised the same as follows:

Details of contravention

Penalty

a) Unauthorized trading** observed by Arbitrators while finalizing Arbitration award under old mechanism, even if trading member settles the claim. b) Unauthorized trading** as being observed by Conciliator/ Arbitration under Online Dispute Resolution (ODR) mechanism introduced w.e.f. August 16, 2023, even if trading member settles the claim. ** (induced trades or trades executed by the trading member using any unfair means i.e. obtaining user ID and password of the client to execute trades etc., without the consent of the client).

I.            Monetary Penalty per case shall be Rs.50,000/- or 3% of the admissible amount whichever is higher as determined in the conciliatory mechanism / Arbitration award.        II.            In addition to above penalty, a.       Member will be debarred from taking new clients for a period of one month, in case 25% of all the complaints (not less than 05) placed before conciliatory mechanism / Arbitration in the immediately preceding calendar quarter are determined by it to be unauthorized trading cases. b.       Where the number of unauthorized trading cases as per the numbers indicated at (II)(a) persist for three consecutive quarters, the Member concerned will be debarred from taking new clients and Authorized Persons (APs) if any, for a period of three months. c.       The number of unauthorized trading cases as per numbers indicated at (II)(a) persists beyond three consecutive quarters, the matter be placed before the relevant Committee, for action. d.       Member will be referred for special purpose inspection in case any of the above instances i.e., (II) (a, b, c) is triggered.

In case the Trading Member challenges the observation of conciliator/s or Arbitrator/s  and the same is reversed at the higher forum, the penalty levied will be returned to the member.

The revised penalty structure shall be applicable for all the cases placed before Conciliator/s or Arbitrator/s from the date of issue of this notice.

The Trading Members are advised to take note of the above revised penalty norms.

In case of any clarification the Trading members may contact the undersigned official on 022-22725185 OR 022-22728745

For and on behalf of BSE Ltd.

Abhijit Pai                                                                              Shilpa Mhapsekar        

Deputy General Manager                                                        Manager 

Investor Services                                                                   Investor Services