ISJ Securities Pvt. Ltd.
Prudent Risk Management Policy
1.Client Registration
Thisworkisundertakenbyourownstaffandwehavenotoutsourced.Weasktheclienttofillupthe
formandgiveallthenecessarydetailslikeEmailId,MobileNo.etc.OurOwnStaffatthebranches doestheInPersonverificationoftheclientverifythedocumentswiththeoriginal,Checksthedataon theformwiththedocuments,enters thedataintheBackOffice.Ourownemployeesatourown branchstaffprocesstheformsverifytheentereddataandiftheformsdataarecompleteasperthe SEBI-NSEguidelinestheyuploadUCC thedatatotheexchange AstheKYCdepartmentwillcheck the details so that maker checker concept is used.
2.Closure of Clients Accounts / Dormant Account :
AwrittenconsentisobtainedfromtheclienttoclosetheTradingaccount.Thesignatureisverified,a
callismadetotheclienttoverifyand theaccountisclosedtheremainingbalanceifanyispaidback totheclient. AlldormantaccountslimitaresuspendedinODINterminal.Hencethereisnoquestion ariseoftradingintheseaccount.Itwillbeactivated onlyaftergettingtheproperintimationfromthe branchmanager and thebranchmanagersareinformedtotakethenecessaryduediligencebefore requesting the activation.
3. Order Receipt and Execution
Alldealersareassignedspecificclientsandthedealersarewellversedwiththeclientsandtheyknow
the credentials ofthe clients.
Iftheparticulardealerisabsentthenthebackupdealerwilltaketheconsentofthebranchmanger andexecutestheorder.
Wehaveariskmanagementsoftwarewhereinallthefinancialdetailsoftheclientsacrossall exchangesandsegmentsalongwiththePoolHoldings/DPholdings andcollateralholdingsare shown.
AnybuyorderofvalueofRs.25lacsandabovedealershouldcheckwiththebranchmanager. IncasethebuyorsellorderismorethanRs.100lacsandaboveclearancefromheadoftheriskat H.O.tobetaken. Headofthedepartmentwillgiveconsentonlybasedontheclientspasttransaction recordandabilitytomakeimmediatepayment/collateral available etc. Whereverrequiredriskdivision shouldconsult regionalmanager andor directors. Noneofouremployeeshavethediscretionarypowerstoexecutetheclientsorders.Allthetrade confirmations are sent at the end of day bythe way of electronic contract notes and SMS.
4. Contract Notes, Daily Margin statements Quarterly statement of Accounts:
Allthecontractnotes/DailyMarginstatement/QuarterlystatementofAccountsaresentbydigital
signature–Allthesedocuments aresentinNontamperableHTMLform andbythewayofdigital signature. Wehavegotaseparateteamtosendcontractnotesandtocheckifanycontractnote
bounces. Ifitbouncesourdepartment/branchmanagerwillcontactclientandrequesthimtoclear theInbox. WhereverclientcouldnotbecontactedtheH.O/branchmanagerwillissuephysical contract note. Elog is maintainedbythe relevantsoftwarefor all activities in this regard.
5. Risk Management
Wehaveaseparatedeptwhichmonitortheriskonline.WehaveODINsoftwarefortrading.Allthe
limitsareuploadedtotheODINsoftwareonadailybasisbeforestartofthemarketandthelimitsare givenbasedontheclear/reconciledcreditbalanceintheledger/PayInofthesecuritiesforthenon
settledsettlements/collateralsavailable/Valuesofthestocklyinginclientbeneficiaryaccountetc. Ourstaffat theRiskmanagement dept monitorstrades on lineduring the market hours.
The limits are uploaded dailyintoAdminterminalofCTCL underfollowing criteria
1)Iftheclientisincreditthentheclientwillbeallowedbuyingautomaticallyforthecreditamountin the account rounded off to nearest Rs.100.
2) If the client is in debitthenno buyinglimitis allowed to the client.
3)Iftheclientishavingonlycollateralholdingandheis indebit,thenonlysellinglimitwillbeallowed totheclientuptothevalueof collateralholding multiplied1.1timesofthecollateralholdingvalue
roundedofftonearestRs.100(Extra10%additional sellingexposureisgiventoprotecttheclient from opening price volatility versuspreviousday’s closing price).
4)Iftheclientishavingcollateralholdingandheisincredit,thentheclientwillbeallowedbuying automaticallyforthecreditamountintheaccountroundedofftonearest Rs.100andsellingvalue willbebuyinglimit+holdingvaluemultipliedby1.1timesofthegrossvalueroundedofftonearest
Rs.100
Wehavealsodevelopedasoftwaretotracksynchronizedtrades.Wheneverthereisacheque bouncingcase theintimationissenttotheBranchmanager.Ifthereare3chequebouncingcases thentheclient’slimitissetzerointheODINsoftware.Wesellthestocksaftergivingthenoticein writingtotheclientifthedebitbalanceisnotclearedbytheclient.Wealsosendlettersdemanding payment fromtheHOfor the debitcases.
6. Collection of Margins and allocating exposures
Marginsis collected fromtheclientasperSEBIguidelinesparticularlyincaseofF&Owhileopening
theaccountandbeforeexecutingtheorderwearefindinghowmanysharesheisgivingas collateral. The4timesexposure willbegivenonthecreditbalance/collateralsavailable.Alllimits
aresettoclientlevelnotatthebranch/franchiselevel.AlltradesaremonitoredattheHeadOffice
andthelimitsaresetautomaticallybytakingintoconsiderationledger balances/collateralvaluation in the back office software across all exchanges/ segments.
7. Collection of Payment from clients
Oncethetradesarebilled collectthechequeimmediatelyanddepositchequeinthebank.Wehave
instructedtheBranchManagers thattheyshouldensurethatthechequeshouldbereceivedfromthe samebank whichisdeclaredbythe Client in the KYC documents.
Paymentmustbecollectedincheque only, not by cash.
8. Release of Pay out of Funds / Securities
Allourclientshaveauthorizedustokeepthesecuritiesandfundswithusastheymaysellthebought
securities inthesubsequentsettlements or theymaybuyshares insubsequentsegmentwherethere isacreditasitisdifficulttothemthemeetthePay-Inobligation.Whenevertheyrequirethe
Securities/Fundstheyhaveundertakentoinform tous.
OurclientscontacttherespectiveBranchManagersforthePayoutofSecuritiesandFunds.The
Branch Manager puts the Payout request by email.
Securities Pay Out :
NowourriskmanagementassessestherequestIfthereisasecuritiesPayouttheylookforthe
UnsettledSalesObligation oftheclientsinallExchanges/Segmentsforthatperticuarscripandthey forwardtherequesttotheSettlementDepartmentforthePayoutofthesecurities.Thisrequestis
senttothesettlementdepartmentBy4.P.M.andthesettlementDepttransfersthesharestothe
Clients account.
FundsPayOut.
TheFundspayoutrequestisreceivedbyRiskaswellastheAccountsdept.AccountDeptforwards
therequesttotheRiskManagementDept.NowourriskmanagementassessestherequestThey checkfortheDishonouredChequeentries/SecuritiesPayinObligation etcandtheyforwardthe
requesttotheAccount DepartmentforthePayoutoftheFunds.TheAccountDeptthensendsthe requesttotheBankforforwardingtheChequesintheclientsnameintherespectiveBranchesof
theirs.WehaveauthorizedourBranchManagerstocollecttheChequesfromtheBank.Theycollect thechequesandhandover thesametothe client
9. Payment of Dividend
WehaveexclusivestaffwhoismonitoringthereceiptofdividendinourbankaccountOncethe
dividend is received the dividend is passed on to client.
10. Liquidation of Client Position in F&O.
AsthereisBSE/NSE/SEBIguidelineswehavetocollectmargin/MTOM.Wetelephonetheclientandrequesthimtoremitthebalancedueamount.Incasetheclientdoesnotremitamountwe
Inform himbySMSthatthepositionwillbesquaredup.Aftersquaringupthepositionweinformhimover phoneandalsosentcontractnotebyECN/SMS. InourAccountopeningformwehavetaken necessaryundertaking in this regard.
Insuchsquareoffposition caseswearealsosendingphysicalcontractnotebycourier/registered post as abundant precaution overand above electronic mail contract..
11. Policy of Internal Shortage
Thesecuritiesdeliveredshortaresubmitted for self auction of payin day to BSE whichissettlementdayonexchangeandthepurchaseconsideration (inclusiveofallstatutorytaxesandlevies)isdebitedtothe short delivering seller client.
12. Allotment / Surrender of Trading Terminals, Opening & closing of Branches
Tradingterminalsareallottedtobranch/Registeredsubbrokersonly.Beforeallottingtheterminals
TheBCFMcertificateisobtainedandtherelevantdataisuploadedtotheexchange.Theonly relevant client codes are mapped to the terminal.
Wehaveateamwhichlocatesthebranchesandtherequiredmanpower.Afterthefinalizationoneof theseniormanagement visitthebranchforopeningthebranchandtomeetthepeople.Healso interactswiththeclient..
Incaseofclosingofthebranchalltheclientsare mappedtonextnearestbranchfortheservicethe
VSATisshiftedandthetrading terminals are cancelled.
14. Branches / Sub Brokers , Audits
Wehave aauditteamwhichvisitsthebranchesandsubbrokersfortheauditandtheauditreportis
submittedto themanagement.AllBranches/Subbrokresarecoveredwithin5yearsandtheteam auditsat least 20% of theSubbrokers/Branchesina year.
13. Internet Trading
Weareprovidingexebasedinternettradingtoclients.Theexposureis givenbasedontheclearcredit
balanceofclientintheledgeracrossexchangesandsegments. NotradingisallowedinT,Zgroup stocks, farmonthcontracts andilliquidsecurities.Allpasswordsaresenttotheemailaddressgiven
in the KYC form and all passwordrequests are accepted from the emailidsgiveninKYC form only.
14. Trading in T2T / Z/ Penny stocks / IlliquidSecurities
NormallywerefusetradingtoclientinT2T/Z/Pennystocks/IlliquidSecurities.Underexceptional
circumstancesandconsideringmeritsoncasetocasebasis,tradinginpennystocks/T2T/Z categorywouldbeallowedtoclientsondeliverybasissubjecttostringentverifications oftheclient holdings, intentionsandbonafidereasonsgivenbyintendingclient.
15. PMLA
WrittenProceduresofinternalcontroltoimplementtheAnti-moneylaunderingprovisionsadoptedby
theCompanytoensurethatwecomplywiththerequirementsoftheprovisionsofthe Preventionof
Money Laundering Act, 2002 (PMLA)
WehavesentacirculartoalltheBranchManager/Subbrokers/Authorisedpersons.Theglimpse of thesaidcircularis asfollows.
Proceduresofinternal controltoimplement the Anti-money laundering provisions
[1]ThePreventionofMoneyLaunderingAct,2002(PMLA)hasbeenbroughtintoforcewitheffect
from1stJuly2005.
[2]OurCompanyhasappointedMr. Prakash ShuklaatBombayOfficeas“PrincipalOfficer“as required under the Act
[3]ProvisionsofthisActareapplicable to us as ‘intermediary’ (which includes a stock-broker etc.)
[4]Wehavetomaintainarecordofallthetransactions;thenatureandvalueofwhichhasbeen prescribedintheRulesnotifiedunder the PMLA. Suchtransactionsinclude :
(i ) All cashtransactions of the value of more thanRs10 lacsorits equivalent inforeign currency.
(ii)Allseriesofcashtransactionsintegrallyconnectedtoeachotherwhichhavebeenvaluedbelow
Rs10lacsoritsequivalentinforeigncurrencywheresuchseriesoftransactionstakeplacewithinone calendarmonth.
(iii)Allsuspicioustransactionswhetheror notmadeincash.
{some examples of “suspicious transactions” are as under }
ThePreventionofMoneylaunderingAct,2002andtheRulesnotifiedthereunderrequireevery intermediarytofurnishdetailsofsuspicioustransactionswhetherornotmadeincash.Suspicious
transaction means a transactionwhetheror notmadeincashwhich, toa personacting ingoodfaith– (a) gives rise to a reasonable ground of suspicion that it may involvethe proceeds of crime; or
(b) appears to be made in circumstances of unusual or unjustifiedcomplexity; or
(c)appearstohavenoeconomicrationale orbonafide purpose.
Broadcategoriesofreasonforsuspicionandexamplesofsuspicioustransactionsforanintermediary areindicatedasunder:
Identity of Client
・False identificationdocuments
・Identification documents which could not be verifiedwithinreasonabletime
・Non-face to face client
・Doubt over the realbeneficiaryoftheaccount
・Accounts openedwith names very close to other established business entities
SuspiciousBackground
・Suspicious background or linkswithknowncriminals
Multiple Accounts
・Largenumberofaccountshavingacommonaccountholder,introducerorauthorizedsignatory
with no rationale
・Unexplained transfers between multipleaccounts withno rationale
Activity in Accounts
・Unusual activitycompared to past transactions
・Use ofdifferent accounts byclientalternatively
・Sudden activity in dormant accounts
・Activity inconsistent with what would be expectedfromdeclaredbusiness
・Account used for circular trading
Nature of Transactions
・Unusual orunjustifiedcomplexity
・No economicrationale orbonafide purpose
・Source of fundsare doubtful
・Appears to becase of insider trading
・Investmentproceedstransferred to a third party
・Transactions reflect likely market manipulations
・Suspiciousoff market transactions
Value of Transactions
・Value just under thereporting threshold amount in an apparent attempt to avoid reporting
・Large sums being transferredfrom overseasformakingpayments
・Inconsistent withtheclients apparent financial standing
・Inconsistency in the payment pattern by client
・Block deal which isnot at market priceor prices appear tobe artificiallyinflated/deflated
Proceduresofinternal controltoimplement the Anti-money laundering provisions
[5]Cashtransaction/s:AnyTransaction/sfallingunderthe4(i)and(ii)aboveiseasyto
understand.HoweverasperCompany’spolicyandstrictinstructionswedonothaveanycash transaction even for small amount. It is company’s policy to settle all dues for any buy/sell transactions(includingAuctions)orreceipt/paymentofmarginsetcbycheque/sonly.Assuchthere shouldnotbeanythingtoreportonthiscount.Howeverallrecipientsofthisinstructionsarerequired toreportanysuchCashTransaction/sifitcomestotheirknowledgeshouldbeimmediatelyreported to Mr. Prakash Shukla –Principal officer.
[6]Suspicioustransactions:AsperCompany’spolicyandstrictinstructionswedonottakenewclient unlessproperlyintroducedbysomeoneknowntous.FurtherasperCompany’spolicyunlessnow clienthasproperlyfilledupandsubmittedKYCFormalongwithnecessaryproofsforresidence/age etcwedonotregisteredthemasourclient.Howeverallrecipientsofthisinstructionsarerequiredto reportifanytransaction/sbyanyclient/s/anypaymentordeliveryofsecurity/orsizeofthe transactionoranythingseems“Suspicious”oritcomestotheirknowledgeshouldbeimmediately reported to Mr. Prakash Shukla – Principal officer.
[7]Youmustdiscussthiswithyourassistantsandtellthemtobringtoyournoticeanyofthe transactionsdescribedabovetoyournoticeimmediately.FurtherInfutureifanynewassistantis assigned to you, you must briefed him/her about reporting the matterto you immediately.
[8]Allreportingtothe concernedauthorities will be done from HeadOffice –Mumbai.
[9]Incaseyourequireanyfurtherinformation/clarificationpleasecontactMr. Prakash Shukla–Principal officer
16. Power of Attorney.
WehavenottakenanyPowerofAttorneyfromclienttooperatetheclientstradingaccount.POAis
takenbyCDSLdepttoadjustthesharesforsettlementobligationwhohavethedemataccountwith us.Wehave not takenany POA onbank accounts.
17. Internal Revival proceduresfor detention of violations
WehaveamonthlymeetingwithalltheDepartmentalHeadstodiscusstherelevantdevelopments in
theCapital Marketsandtoreviewthecircularsissuedbytherelevantauthoritiesandourprocedures to follow and to detect the violations if any.
We have the internalauditors who checks and reports of any deviation found in the procedures.
AfterthereceiptoftheInternalauditreportallthedepartmentalheadsmeetsonceagaintodiscuss the report and to strengthentheprocedures.