Customer Relations Policy

Introduction:

Customer Service is a key focus area at ICICI Securities Limited (‘the Company’). The Company is committed to provide consistent and superior customer experience to its customers. The Company deals with investment products and other related services which may be delivered through an online or an offline mode. Besides service, an important part of the customer relation comprises making investors aware of key products and risks associated with the products. The objective of the Customer Relations Policy is to increase the general awareness of the Company’s clients on the overall risk while investing, making them aware of their rights and grievance redressal mechanism.

The Policy:

ICICI Securities Limited - Customer Relations Policy is completely guided by the following important documents as prescribed by Securities and Exchange Board of India (‘SEBI’).

1. Rights and Obligations of Stock Brokers, Sub-Brokers and Clients: The document comprehensively covers the Rights and Obligations of the Company as a Stock Broker. The document is given in Annexure I.

2. Risk Disclosure Document for Capital Market and Derivatives Segments: This document contains important information on trading in Equities/Derivatives Segments of the Stock Exchanges and specifically covers the risks that are important for the investors to be aware of. The document is given in Annexure II.

3. Guidance Note - Do’s and Don’ts for Trading on the Exchange(s) for Investors: The note provides important points that investors need to be aware of while investing and is given in Annexure III.

In addition to above, the Company offers a well-defined Grievance Redressal mechanism including a process for customers to escalate any complaints if the customers are not satisfied with the response. The Grievance Redressal mechanism is available on:

https://secure.icicidirect.com/IDirectTrading/customer/StaticData/complain.htm.

The above documents comprehensively cover the objectives of the Customer Relations Policy.

Monitoring and Review:

In order to ensure that clients are aware of the Customer Relations Policy, the Company will ensure that the above documents are disseminated to all the account holders or are available online on the main website.

The Audit Committee and the Customer Service Council would review the trends in the complaints received by the Company. Given the large number of online transactions, the

issues relating to systems as reported by the customers would be presented separately to the Audit Committee.

The Policy would be put for review once in every two years to the Board.

RIGHTS AND OBLIGATIONS OF STOCK BROKERS,

SUB-BROKERS AND CLIENTS

as prescribed by SEBI and Stock Exchanges

1. The client shall invest/trade inthose securities/ contracts/other instruments admitted todealings on the exchanges asdefined in the Rules, Byelawsand Regulations of ExchangesSecurities and ExchangeBoard of India (SEBI) andcirculars/notices issued thereunder from time to time.

2. The stock broker, sub-brokerand the client shall be boundby all the Rules, Byelaws andRegulations of the Exchangeand circulars/notices issuedthere under and Rules andRegulations of SEBI andrelevant notifications ofGovernment authorities asmay be in force from time totime.

3. The client shall satisfy itself ofthe capacity of the stockbroker to deal in securitiesand/or deal in derivativescontracts and wishes toexecute its orders through thestock broker and the clientshall from time to timecontinue to satisfy itself ofsuch capability of the stockbroker before executingorders through the stockbroker.

4. The stock broker shallcontinuously satisfy itselfabout the genuineness andfinancial soundness of theclient and investment

Version 51 / 623 / 552 / 1 HUF

objectives relevant to theservices to be provided.

5. The stock broker shall takesteps to make the client awareof the precise nature of theStock broker’s liability forbusiness to be conducted,including any limitations, theliability and the capacity inwhich the stock broker acts.

6. The sub-broker shall providenecessary assistance and co-operate with the stock brokerin all its dealings with theclient(s).

CLIENT INFORMATION7. The client shall furnish all such

details in full as are requiredby the stock broker in“Account Opening Form” withsupporting details, mademandatory by stockexchanges/SEBI from time totime.

8. The client shall familiarizehimself with all themandatory provisions in theAccount Opening docu-ments. Any additional clausesor docu-ments specified bythe stock broker shall be non-mandatory, as per terms &conditions accepted by theclient.

9. The client shall immediatelynotify the stock broker in

Annexure I

writing if there is any changein the information in the‘account opening form’ asprovided at the time ofaccount opening andthereafter; including theinformation on winding uppetition/insolvency petition orany litigation which may havematerial bearing on hiscapacity. The client shallprovide/update the financialinformation to the stockbroker on a periodic basis.

10. The stock broker and sub-broker shall maintain all thedetails of the client asmentioned in the accountopening form or any otherinformation pertaining to theclient, confidentially and thatthey shall not disclose thesame to any person/authorityexcept as required under anylaw/regulatory requirements.Provided however that thestock broker may so discloseinformation about his client toany person or authority withthe express permission of theclient.

MARGINS11. The client shall pay applicable

initial margins, withholdingmargins, special margins orsuch other margins as areconsidered necessary by thestock broker or the Exchangeor as may be directed by SEBIfrom time to time asapplicable to the segment(s)in which the client trades. Thestock broker is permitted in itssole and absolute discretion to

collect additional margins(even though not required bythe Exchange, ClearingHouse/Clearing Corporationor SEBI) and the client shall beobliged to pay such marginswithin the stipulated time.

12. The client understands thatpayment of margins by theclient does not necessarilyimply complete satisfaction ofall dues. In spite of consistentlyhaving paid margins, theclient may, on the settlementof its trade, be obliged to pay(or entitled to receive) suchfurther sums as the contractmay dictate/require.

TRANSACTIONS ANDSETTLEMENTS

13. The client shall give any orderfor buy or sell of a security/derivatives contract in writingor in such form or manner, asmay be mutually agreedbetween the client and thestock broker. The stock brokershall ensure to place ordersand execute the trades of theclient, only in the UniqueClient Code assigned to thatclient.

14. The stock broker shall informthe client and keep himapprised about trading/settlement cycles, delivery/payment schedules, anychanges therein from time totime, and it shall be theresponsibility in turn of theclient to comply with suchschedules/procedures of the

relevant stock exchangewhere the trade is executed.

15. The stock broker shall ensurethat the money/securitiesdeposited by the client shallbe kept in a separate account,distinct from his/its any otherclient and shall not be used bythe stock broker for himself/itself or for any other client orfor any purpose other than thepurposes mentioned in Rules,Regulations, circulars,notices, guidelines of SEBIand/or Rules, Regulations,Bye-laws, circulars andnotices of Exchange.

16. Where the Exchange(s)cancels trade(s) suo moto allsuch trades including thetrade/s done on behalf of theclient shall ipso facto standcancelled, stock broker shallbe entitled to cancel therespective contract(s) withclient(s).

17. The transactions executed onthe Exchange are subject toRules, Byelaws and Regula-tions and circulars/noticesissued thereunder of theExchanges where the trade isexecuted and all parties tosuch trade shall havesubmitted to the jurisd-ictionof such court as may bespecified by the Byelaws andRegulations of the Exchangeswhere the trade is executedfor the purpose of givingeffect to the provisions of theRules, Byelaws andRegulations of the Exchanges

and the circulars/noticesissued thereunder.

BROKERAGE18. The Client shall pay to the stock

broker brokerage andstatutory levies as areprevailing from time to timeand as they apply to theClient’s account, transactionsand to the services that stockbroker renders to the Client.The stock broker shall notcharge brokerage more thanthe maximum brokeragepermissi-ble as per the rules,regulations and bye-laws ofthe relevant stock exchangesand/or rules and regulationsof SEBI.

LIQUIDATION AND CLOSEOUT OF POSITION

19. Without prejudice to the stockbroker’s other rights(including the right to refer amatter to arbitration), theclient understands that thestock broker shall be entitledto liquidate/close out all or anyof the client’s positions fornon-payment of margins orother amounts, outstandingdebts, etc. and adjust theproceeds of such liquidation/close out, if any, against theclient’s liabilities/obligations.Any and all losses andfinancial charges on accountof such liquidation /closing-out shall be charged to andborne by the client.

20. In the event of death orinsolvency of the client or his/its otherwise becoming

incapable of receiving andpaying for or delivering ortransferring securities whichthe client has ordered to bebought or sold, stock brokermay close out the transactionof the client and claim losses,if any, against the estate of theclient. The client or hisnominees, successors, heirsand assignee shall be entitledto any surplus which mayresult there from. The clientshall note that transfer offunds/securities in favor of aNominee shall be validdischarge by the stock brokeragainst the legal heir.

21. The stock broker shall bring tothe notice of the relevantExchange the informationabout default in payment/delivery and related aspectsby a client. In case wheredefaulting client is acorporate entity partnership /proprietary firm or any otherartificial legal entity, then thename(s) of Director(s)/Promoter (s ) /Par tner (s ) /Proprietor as the case may be,shall also be communicatedby the stock broker to therelevant Exchange(s).

DISPUTE RESOLUTION22. The stock broker shall provide

the client with the relevantcontact details of theconcerned Exchanges andSEBI.

23. The stock broker shall co-operate in redressing griev-ances of the client in respect

of all transactions routedthrough it and in removingobjections for bad delivery ofshares, rectification of baddelivery, etc.

24. The client and the stock brokershall refer any claims and/ordisputes with respect todeposits, margin money, etc.,to arbitration as per theRules,  Byelaws andRegulations of the Exchangeswhere the trade is executedand circulars/notices issuedthereunder as may be in forcefrom time to time.

25. The stock broker shall ensurefaster settlement of anyarbitration proceedingsarising out of the transactionsentered into between him vis-à-vis the client and he shall beliable to implement thearbitration awards made insuch procee-dings.

26. The client/stock-broker under-stands that the instructionsissued by an authorizedrepresentative for disputeresolution, if any, of the client/stock-broker shall be bindingon the client/stock-broker inaccordance with the letterauthorizing the saidrepresentative to deal onbehalf of the said client/stock-broker.

TERMINATION OF RELATI-ONSHIP

27. This relationship between thestock broker and the clientshall be terminated; if the

stock broker for any reasonceases to be a member of thestock exchange includingcessation of membership byreason of the stock broker’sdefault, death, resignation orexpulsion or if the certificateis cancelled by the Board.

28. The stock broker, sub-brokerand the client shall be entitledto terminate the relationshipbetween them without givingany reasons to the other party,after giving notice in writingof not less than one month tothe other parties. Notwith-standing any such termina-tion, all rights, liabilities andobligations of the partiesarising out of or in respect oftransactions entered intoprior to the termination of thisrelation-ship shall continue tosubsist and vest in/be bindingon the respective parties orhis/its respective heirs,executors, administrators,legal represe-ntatives orsuccessors, as the case maybe.

29. In the event of demise/insolvency of the sub-brokeror the cancellation of his/itsregistration with the Boardor/withdrawal of recognitionof the sub-broker by the stockexchange and/or terminationof the agreement with the subbroker by the stock broker, forany reason whatsoever, theclient shall be informed ofsuch termination and theclient shall be deemed to bethe direct client of the stock

broker and all clauses in the‘Rights and Obligations’document(s) gover-ning thestock broker, sub-broker andclient shall continue to be inforce as it is, unless the clientintimates to the stock brokerhis/its intention to terminatetheir relationship by giving anotice in writing of not lessthan one month.

ADDITIONAL RIGHTS ANDOBLIGATIONS

30. The stock broker shall ensuredue protection to the clientregarding client’s rights todividends, rights or bonusshares, etc. in respect oftransactions routed through itand it shall not do anythingwhich is likely to harm theinterest of the client withwhom and for whom theymay have had transactions insecurities.

31. The stock broker and clientshall reconcile and settle theiraccounts from time to time asper the Rules, Regulations,Bye Laws, Circulars, Noticesand Guidelines issued by SEBIand the relevant Exchangeswhere the trade is executed.

32. The stock broker shall issue acontract note to hisconstituents for tradesexecuted in such format asmay be prescribed by theExchange from time to timecontaining records of alltransactions including detailsof order number, tradenumber, trade time, trade

price, trade quantity, details ofthe derivatives contract, clientcode, brokerage, all chargeslevied etc. and with all otherrelevant details as requiredtherein to be filled in andissued in such manner andwithin such time as prescribedby the Exchange. The stockbroker shall send contractnotes to the investors withinone working day of theexecution of the trades in hardcopy and/or in electronic formusing digital signature.

33. The stock broker shall makepay out of funds or delivery ofsecurities, as the case may be,to the Client within oneworking day of receipt of thepayout from the relevantExchange where the trade isexecuted unless otherwisespecified by the client andsubject to such terms andconditions as may beprescribed by the relevantExchange from time to timewhere the trade is executed.

34. The stock broker shall send acomplete ‘Statement ofAccounts’ for both funds andsecurities in respect of each ofits clients in such periodicityand format within such time,as may be prescribed by therelevant Exchange, from timeto time, where the trade isexecuted. The Statement shallalso state that the client shallreport errors, if any, in theStatement within such time asmay be prescribed by the

relevant Exchange from timeto time where the trade wasexecuted, from the receiptthereof to the Stock broker.

35. The stock broker shall senddaily margin statements to theclients. Daily Marginstatement should include,inter-alia, details of collateraldeposited, collateral utilizedand collateral status (availablebalance/due from client) withbreak up in terms of cash,Fixed Deposit Receipts (FDRs),Bank Guarantee andsecurities.

36. The Client shall ensure that ithas the required legalcapacity to, and is authorizedto, enter into the relationshipwith stock broker and iscapable of performing hisobligations and undertakingshereunder. All actionsrequired to be taken to ensurecompliance of all thetransactions, which the Clientmay enter into shall becompleted by the Client priorto such transaction beingentered into.

ELECTRONIC CONTRACTNOTES (ECN)

37. In case, client opts to receivethe contract note in electronicform, he shall provide anappropriate e-mail id to thestock broker. The client shallcommunicate to the stockbroker any change in theemail-id through a physicalletter. If the client has opted forinternet trading, the requestfor change of email id may be

made through the securedaccess by way of clientspecific user id and password.

38. The stock broker shall ensurethat all ECNs sent through thee-mail shall be digitally signed,encrypted, non-tamper ableand in compliance with theprovisions of the IT Act, 2000.In case, ECN is sent throughe-mail as an attachment, theattached file shall also besecured with the digitalsignature, encrypted and non-tamperable.

39. The client shall note that non-receipt of bounced mailnotification by the stockbroker shall amount todelivery of the contract noteat the e-mail ID of the client.

40. The stock broker shall retainECN and acknowledgement ofthe e-mail in a soft and non-tamperable form in themanner prescribed by theexchange in compliance withthe provisions of the IT Act,2000 and as per the extantrules/regulations/circulars/guidelines issued by SEBI/Stock Exchanges from time totime. The proof of delivery i.e.,log report generated by thesystem at the time of sendingthe contract notes shall bemaintained by the stockbroker for the specified periodunder the extant regulationsof SEBI/stock exch-anges. Thelog report shall provide thedetails of the contract notesthat are not delivered to the

client/e-mails rejected orbounced back. The stockbroker shall take all possiblesteps to ensure receipt ofnotification of bounced mailsby him at all times within thestipulated time period underthe extant regulations of SEBI/stock exchanges.

41. The stock broker shallcontinue to send contractnotes in the physical mode tosuch clients who do not optto receive the contract notesin the electronic form.Wherever the ECNs have notbeen delivered to the client orhas been rejected (bouncingof mails) by the e-mail ID ofthe client, the stock brokershall send a physical contractnote to the client within thestipulated time under theextant regulations of SEBI/stock exchanges and maintainthe proof of delivery of suchphysical contract notes.

42. In addition to the e-mail com-munication of the ECNs to theclient, the stock broker shallsimultaneously publish theECN on his designated web-site, if any, in a secured wayand enable relevant access tothe clients and for thispurpose, shall allot a uniqueuser name and password tothe client, with an option to theclient to save the contractnote electronically and/or takea print out of the same.

LAW AND JURISDICTION43. In addition to the specific

rights set out in this

document, the stock broker,sub-broker and the client shallbe entitled to exercise anyother rights which the stockbroker or the client may haveunder the Rules, Bye-laws andRegulations of the Exchangesin which the client chooses totrade and circulars/noticesissued thereunder or Rulesand Regulations of SEBI.

44. The provisions of thisdocument shall always besubject to Governmentnotifications, any rules,regulations, guidelines andcirculars/notices issued bySEBI and Rules, Regulationsand Bye laws of the relevantstock exchanges, where thetrade is executed, that may bein force from time to time.

45. The stock broker and the clientshall abide by any awardpassed by the Arbitrator(s)under the Arbitration andConciliation Act, 1996.However, there is also aprovision of appeal within thestock exchanges, if eitherparty is not satisfied with thearbitration award.

46. Words and expressions whichare used in this document butwhich are not defined hereinshall, unless the contextotherwise requires, have thesame meaning as assignedthereto in the Rules, Byelawsand Regulations and circulars/notices issued thereunder ofthe Exchanges/SEBI.

47. All additional voluntaryclauses/document added bythe stock broker should not bein contravention with rules/regulations/notices/circularsof Exchanges/SEBI. Anychanges in such voluntaryclauses/document(s) need tobe preceded by a notice of 15days. Any changes in therights and obligations whichare specified by Exchanges/SEBI shall also be brought tothe notice of the clients.

48. If the rights and obligations ofthe parties hereto are alteredby virtue of change in Rulesand regulations of SEBI orBye-laws, Rules andRegulations of the relevantstock Exchanges where thetrade is executed, suchchanges shall be deemed tohave been incorporatedherein in modification of therights and obligations of theparties mentioned in thisdocument.

INTERNET & WIRELESSTECHNOLOGY BASEDTRADING FACILITYPROVIDED BY STOCKBROKERS TO CLIENT (Allthe clauses mentioned in the‘Rights and Obligations’document(s) shall beapplicable. Additionally, theclauses mentioned hereinshall also be applicable.)

1. Stock broker is eligible forproviding Internet basedtrading (IBT) and securitiestrading through the use ofwireless technology that shallinclude the use of devices

such as mobile phone, laptopwith data card, etc. which useInternet Protocol (IP). Thestock broker shall comply withall requirements applicable tointernet based trading/securities trading usingwireless technology as may bespecified by SEBI & theExchanges from time to time.

2. The client is desirous ofinvesting/trading in securitiesand for this purpose, the clientis desirous of using either theinternet based trading facilityor the facility for securitiestrading through use ofwireless technology. TheStock broker shall provide theStock broker’s IBT Service tothe Client, and the Client shallavail of the Stock broker’s IBTService, on and subject toSEBI/Exchanges Provisionsand the terms and conditionsspecified on the Stockbroker’s IBT Web Siteprovided that they are in linewith the norms prescribed byExchan-ges/SEBI.

3. The stock broker shall bring tothe notice of client thefeatures, risks, responsibilities,oblig-ations and liabilitiesassociated with securitiestrading through wirelesstechnology/internet/smartorder routing or any othertechnology should bebrought to the notice of theclient by the stock broker.

4. The stock broker shall makethe client aware that the StockBroker’s IBT system itself

generates the initial passwordand its password policy asstipulated in line with normsprescribed by Exchanges/SEBI.

5. The Client shall be responsiblefor keeping the Username andPassword confidential andsecure and shall be solelyresponsible for all ordersentered and transactionsdone by any personwhosoever through the Stockbroker’s IBT System using theClient’s Username and/orPassword whether or not suchperson was authorized to doso. Also the client is aware thatauthentication technologiesand strict security measuresare required for the internettrading/securities tradingthrough wireless technologythrough order routed systemand undertakes to ensure thatthe password of the clientand/or his authorizedrepresentative are notrevealed to any third partyincluding employees anddealers of the stock broker

6. The Client shall immediatelynotify the Stock broker inwriting if he forgets hispassword, discovers securityflaw in Stock Broker’s IBTSystem, discovers/suspectsdiscrepancies/ unauth-orizedaccess through his username/password/account with fulldetails of such unauthorizeduse, the date, the manner andthe transactions effected

pursuant to such unautho-rized use, etc.

7. The Client is fully aware of andunderstands the risks associ-ated with availing of a servicefor routing orders over theinternet/securities tradingthrough wireless technologyand Client shall be fully liableand responsible for any and allacts done in the Client’sUsername/password in anymanner whatsoever.

8. The stock broker shall sendthe order/trade confirmationthrough email to the client athis request. The client is awarethat the order/ trade confirm-ation is also provided on theweb portal. In case client istrading using wirelesstechnology, the stock brokershall send the order/tradeconfirmation on the device ofthe client.

9. The client is aware that tradingover the internet involves

many uncertain factors andcomplex hardware, software,systems, communicationlines, periph-erals, etc. aresusceptible to interruptionsand dislocations. The Stockbroker and the Exchange donot make any representationor warranty that the Stockbroker’s IBT Service will beavailable to the Client at alltimes without anyinterruption.

10. The Client shall not have anyclaim against the Exchange orthe Stock broker on accountof any suspension,interruption, non-availabilityor malfunctioning of theStock broker’s IBT System orService or the Exchange’sservice or systems or non-execution of his orders due toany link/system failure at theClient/Stock brokers/Exchange end for any reasonbeyond the control of thestock broker/Exchanges.

RISK DISCLOSURE DOCUMENT FOR CAPITAL MARKETAND DERIVATIVES SEGMENTS

This document containsimportant information ontrading in Equities/Deriv-atives Segments of the stockexchanges. All prospectiveconstituents should read thisdocument before trading inE q u i t i e s / D e r i v a t i v e sSegments of the Exchanges.

Stock exchanges/SEBI doesneither singly or jointly andexpressly nor impliedlyguarantee nor make anyrepresentation concerningthe completeness, theadequacy or accuracy of thisdisclosure document norhave Stock exchanges /SEBIendorsed or passed anymerits of partici-pating inthe trading segments. Thisbrief statement does notdisclose all the risks andother significant aspects oftrading.

In the light of the risksinvolved, you should under-take transactions only if youunderstand the nature of therelationship into which youare entering and the extentof your exposure to risk.

You must know andappreciate that trading inEquity shares, derivativescontracts or otherinstruments traded on theStock Exchange, which havevarying element of risk, isgenerally not an appropriateavenue for someone oflimited resources/limited

investment and/or tradingexperience and low risktolerance. You shouldtherefore carefully considerwhether such trading issuitable for you in the lightof your financial condition.In case you trade on Stockexchanges and sufferadverse conse-quences orloss, you shall be solelyresponsible for the same andStock exchanges/itsClearing Corporation and/orSEBI shall not beresponsible, in any mannerwhatsoever, for the sameand it will not be open foryou to take a plea that noadequate disclosureregarding the risks involvedwas made or that you werenot explained the full riskinvolved by the concernedstock broker. The constituentshall be solely responsiblefor the consequ-ences andno contract can be rescindedon that account. You mustackno-wledge and acceptthat there can be noguarantee of profits or noexception from losses whileexecuting orders forpurchase and/or sale of aderivative contract beingtraded on Stock exchanges.

It must be clearly under-stood by you that yourdealings on Stock exch-anges through a stockbroker shall be subject toyour fulfilling certain forma-lities set out by the stock

Annexure II

broker, which may inter aliainclude your filling the knowyour client form, reading therights and obligations, do’sand don’ts, etc., and aresubject to the Rules, Byelawsand Regulations of relevantStock exchanges, itsClearing Corp-oration,guidelines prescribed bySEBI and in force from timeto time and Circulars as maybe issued by Stockexchanges or its ClearingCorporation and in forcefrom time to time.

Stock exchanges does notprovide or purport toprovide any advice and shallnot be liable to any personwho enters into any businessrelationship with any stockbroker of Stock exchangesand/or any third party basedon any information contai-ned in this document. Anyinformation contained in thisdocument must not beconstrued as businessadvice. No consideration totrade should be madewithout thoroughly underst-anding and reviewing therisks involved in suchtrading. If you are unsure,you must seek professionaladvice on the same.

In considering whether totrade or authorize someoneto trade for you, you shouldbe aware of or must getacquainted with thefollowing:-

1. BASIC RISKS:1.1 Risk of Higher Volatility:

Volatility refers to the

dynamic changes in pricethat a security/derivativescontract undergoes whentrading activity continues onthe Stock Exchanges.Generally, higher thevolatility of a security/derivatives contract, greateris its price swings. Theremay be normally greatervolatility in thinly tradedsecurities / derivativescontracts than in activesecurities /derivatives contr-acts. As a result of volatility,your order may only bepartially executed or notexecuted at all, or the priceat which your order gotexecuted may be substa-ntially different from the lasttraded price or changesubstantially thereafter,resulting in notional or reallosses.

1.2 Risk of Lower Liquidity:Liquidity refers to the abilityof market participants tobuy and/or sell securities /derivatives contracts expe-ditiously at a competitiveprice and with minimal pricedifference. Generally, it isassumed that more thenumbers of orders availablein a market, greater is theliquidity. Liquidity isimportant because withgreater liquidity, it is easierfor investors to buy and/orsell securities / derivativescontracts swiftly and withminimal price difference,and as a result, investors aremore likely to pay or receivea competitive price forsecurities / derivatives

contracts purchased or sold.There may be a risk of lowerliquidity in some securities /derivatives contracts ascompared to active secu-rities / derivatives contracts.As a result, your order mayonly be partially executed,or may be executed withrelatively greater pricedifference or may not beexecuted at all.

1.2.1 Buying or selling securities/ derivatives contracts as partof a day trading strategy mayalso result into losses,because in such a situation,securities / derivativescontracts may have to besold / purchased at low / highprices, compared to theexpected price levels, so asnot to have any openposition or obligation todeliver or receive a security/ derivatives contract.

1.3 Risk of Wider Spreads:Spread refers to thedifference in best buy priceand best sell price. Itrepresents the differentialbetween the price of buyinga security / derivativescontract and immediatelyselling it or vice versa. Lowerliquidity and higher volatilitymay result in wider thannormal spreads for lessliquid or illiquid securities /derivatives contracts. This inturn will hamper better priceformation.

1.4 Risk-reducing orders:The placing of orders (e.g.,“stop loss” orders, or “limit”orders) which are intendedto limit losses to certain

amounts may not beeffective many a timebecause rapid movement inmarket conditions maymake it impossible toexecute such orders.

1.4.1 A “market” order will beexecuted promptly, subjectto availability of orders onopposite side, withoutregard to price and that,while the customer mayreceive a prompt executionof a “market” order, theexecution may be atavailable prices ofoutstanding orders, whichsatisfy the order quantity, onprice time priority. It may beunderstood that these pricesmay be significantly differentfrom the last traded price orthe best price in that security/ derivatives contract.

1.4.2 A “limit” order will beexecuted only at the “limit”price specified for the orderor a better price. However,while the customer receivesprice protection, there is apossibility that the ordermay not be executed at all.

1.4.3 A stop loss order isgenerally placed “away”from the current price of astock / derivatives contract,and such order getsactivated if and when thesecurity / derivativescontract reaches, or tradesthrough, the stop price. Sellstop orders are enteredordinarily below the currentprice, and buy stop ordersare entered ordinarily abovethe current price. When the

security / derivativescontract reaches the pre -determined price, or tradesthrough such price, the stoploss order converts to amarket/limit order and isexecuted at the limit orbetter. There is no assurancetherefore that the limit orderwill be executable since asecurity / derivatives con-tract might penetrate thepre-determined price, inwhich case, the risk of suchorder not getting executedarises, just as with a regularlimit order.

1.5 Risk of News Announce-ments:News announcements thatmay impact the price ofstock / derivatives contractmay occur during trading,and when combined withlower liquidity and highervolatility, may suddenlycause an unexpectedpositive or negativemovement in the price of thesecurity / contract.

1.6 Risk of Rumors:Rumors about companies /currencies at times float inthe market through word ofmouth, newspapers, web-sites or news agencies, etc.The investors should be waryof and should desist fromacting on rumors.

1.7 System Risk:High volume trading willfrequently occur at themarket opening and beforemarket close. Such highvolumes may also occur atany point in the day. These

may cause delays in orderexecution or confirmation.

1.7.1 During periods of volatility,on account of marketparticipants continuouslymodifying their orderquantity or prices or placingfresh orders, there may bedelays in order executionand its confirmations.

1.7.2Under certain marketconditi-ons, it may bedifficult or impossible toliquidate a position in themarket at a reasonable priceor at all, when there are nooutstanding orders either onthe buy side or the sell side,or if trading is halted in asecurity / derivativescontract due to any actionon account of unusualtrading activity or security /derivatives contract hittingcircuit filters or for any otherreason.

1.8 System/Network Conges-tion:Trading on exchanges is inelectronic mode, based onsatellite/leased line basedcommunications, comb-ination of technologies andcomputer systems to placeand route orders. Thus, thereexists a possibility ofcommunication failure orsystem problems or slow ordelayed response fromsystem or trading halt, orany such other problem/glitch whereby not beingable to establish access tothe trading system/network,which may be beyond

control and may result indelay in processing or notprocessing buy or sellorders either in part or in full.You are cautioned to notethat although theseproblems may be temporaryin nature, but when you haveoutstanding open positionsor unexecuted orders, theserepresent a risk because ofyour obligations to settle allexecuted transactions.

2. As far as Derivativessegments are concerned,please note and get yourselfacquainted with thefollowing additional feat-ures:-

2.1 Effect of “Leverage” or“Gearing”:In the derivatives market, theamount of margin is smallrelative to the value of thederivatives contract so thetransactions are ‘leveraged’or ‘geared’. Derivativestrading, which is conductedwith a relatively smallamount of margin, providesthe possibility of great profitor loss in comparison withthe margin amount. Buttransactions in derivativescarry a high degree of risk.You should therefore comp-letely understand thefollowing statements beforeactually trading in derivat-ives and also trade withcaution while taking intoaccount one’s circu-mstan-ces, financial resources, etc.If the prices move againstyou, you may lose a part ofor whole margin amount in

a relatively short period oftime. Moreover, the loss mayexceed the original marginamount.

A. Futures trading involve dailysettlement of all positions.Every day the open positionsare marked to market basedon the closing level of theindex / derivatives contract.If the contract has movedagainst you, you will berequired to deposit theamount of loss (notional)resulting from suchmovement. This amount willhave to be paid within astipulated time frame, gen-erally before commen-cement of trading on nextday.

B. If you fail to deposit theadditional amount by thedeadline or if an outstandingdebt occurs in your account,the stock broker mayliquidate a part of or thewhole position or substitutesecurities. In this case, youwill be liable for any lossesincurred due to such close-outs.

C. Under certain market con-ditions, an investor may findit difficult or impossible toexecute transactions. Forexample, this situation canoccur due to factors such asilliquidity i.e. when there areinsufficient bids or offers orsuspension of trading due toprice limit or circuit breakersetc.

D. In order to maintain marketstability, the following steps

may be adopted: changes inthe margin rate, increases inthe cash margin rate orothers. These new measuresmay also be applied to theexisting open interests. Insuch conditions, you will berequired to put up additionalmargins or reduce yourpositions.

E. You must ask your broker toprovide the full details ofderivatives contracts youplan to trade i.e. the contractspecifications and theassociated obligations.

2.2 Currency specific risks:1. The profit or loss in

transactions in foreigncur rency-den-ominatedcontracts, whether they aretraded in your own oranother jurisdiction, will beaffected by fluctuations incurrency rates where thereis a need to convert from thecurrency denomination ofthe contract to anothercurrency.

2. Under certain market condi-tions, you may find itdifficult or impossible toliquidate a position. This canoccur, for example when acurrency is deregulated orfixed trading bands arewidened.

3. Currency prices are highlyvolatile. Price movementsfor currencies are influencedby, among other things:changing supply-demandrelationships; trade, fiscal,monetary, exchange control

programs and policies ofgovernments; foreignpolitical and economicevents and policies; changesin national and internationalinterest rates and inflation;currency devaluation; andsentiment of the marketplace. None of these factorscan be controlled by anyindividual advisor and noassurance can be given thatan advisor ’s advice willresult in profitable trades fora participating customer orthat a customer will notincur losses from suchevents.

2.3 Risk of Option holders:1. An option holder runs the

risk of losing the entireamount paid for the optionin a relatively short period oftime. This risk reflects thenature of an option as awasting asset whichbecomes worthless when itexpires. An option holderwho neither sells his optionin the secondary market norexercises it prior to itsexpiration will necessarilylose his entire investment inthe option. If the price of theunderlying does not changein the anticipated directionbefore the option expires, toan extent sufficient to coverthe cost of the option, theinvestor may lose all or asignificant part of hisinvestment in the option.

2. The Exchanges may imposeexercise restrictions andhave absolute authority torestrict the exercise of

options at certain times inspecified circum-stances.

2.4 Risks of Option Writers:1. If the price movement of the

underlying is not in theanticipated direction, theoption writer runs the risksof losing substantialamount.

2. The risk of being an optionwriter may be reduced by thepurchase of other options onthe same underlying interestand thereby assuming aspread position or byacquiring other types ofhedging positions in theoptions markets or othermarkets. However, evenwhere the writer hasassumed a spread or otherhedging position, the risksmay still be significant. Aspread position is notnecessarily less risky than asimple ‘long’ or ‘short’position.

3. Transactions that involvebuying and writing multipleoptions in combination, orbuying or writing options incombination with buying orselling short the underlyinginterests, present additionalrisks to investors.Combination transactions,such as option spreads, aremore complex than buyingor writing a single option.And it should be furthernoted that, as in any area ofinvesting, a complexity notwell understood is, in itself,a risk factor. While this is not

to suggest that combinationstrategies should not beconsidered, it is advisable, asis the case with allinvestments in options, toconsult with someone whois experienced andknowledgeable with respectto the risks and potentialrewards of com-binationtransactions under variousmarket circumstances.

3. TRADING THROUGH WIRE-LESS TECHNOLOGY/SMART ORDER ROUTINGOR ANY OTHER TECHN-OLOGY:Any additional provisionsdefining the features, risks,responsibilities, obligationsand liabilities associated withsecurities trading throughwireless technology/ smartorder routing or any othertechnology should bebrought to the notice of theclient by the stock broker.

4. GENERAL4.1 The term ‘constituent’ shall

mean and include a client, acustomer or an investor, whodeals with a stock broker forthe purpose of acquiringand/or selling of securities /deriva-tives contractsthrough the mechanismprovided by the Exchanges.

4.2 The term ‘stock broker’ shallmean and include a stockbroker, a broker or a stockbroker, who has beenadmitted as such by theExchanges and who holds aregistration certificate fromSEBI.

GUIDANCE NOTE - DO’s AND DON’Ts FOR TRADING ON THE

EXCHANGE(S) FOR INVESTORS

BEFORE YOU BEGIN TO TRADE

1. Ensure that you deal with and through only SEBI registered

intermediaries. You may check their SEBI registration certificate

number from the list available on the Stock exchanges BSE -

www.bseindia.com, NSE- www.nseindia.com and SEBI website

www.sebi.gov.in

2. Ensure that you fill the KYC form completely and strike off the

blank fields in the KYC form.

3. Ensure that you have read all the mandatory documents viz.

Rights and Obligations, Risk Disclosure Document, Policy and

Procedure document of the stock broker.

4. Ensure to read, understand and then sign the voluntary clauses,

if any, agreed between you and the stock broker. Note that the

clauses as agreed between you and the stock broker cannot be

changed without your consent.

5. Get a clear idea about all brokerage, commissions, fees and

other charges levied by the broker on you for trading and the

relevant provisions/ guidelines specified by SEBI/Stock

exchanges.

6. Obtain a copy of all the documents executed by you from the

stock broker free of charge.

7. In case you wish to execute Power of Attorney (POA) in favour

of the Stock broker, authorizing it to operate your bank and

demat account, please refer to the guidelines issued by SEBI/

Exchanges in this regard.

TRANSACTIONS AND SETTLEMENTS

8. The stock broker may issue electronic contract notes (ECN) if

specifically authorized by you in writing. You should provide

your email id to the stock broker for the same. Don’t opt for

Annexure III

ECN if you are not familiar with computers.

9. Don’t share your internet trading account’s password with

anyone.

10. Don’t make any payment in cash to the stock broker.

11. Make the payments by account payee cheque in favour of the

stock broker. Don’t issue cheques in the name of sub-broker.

Ensure that you have a documentary proof of your payment/

deposit of securities with the stock broker, stating date, scrip,

quantity, towards which bank/ demat account such money or

securities deposited and from which bank/ demat account.

12. Note that facility of Trade Verification is available on stock

exchanges’ websites, where details of trade as mentioned in the

contract note may be verified. Where trade details on the website

do not tally with the details mentioned in the contract note,

immediately get in touch with the Investors Grievance Cell of

the relevant Stock exchange.

13. In case you have given specific authorization for maintaining

running account, payout of funds or delivery of securities (as

the case may be), may not be made to you within one working

day from the receipt of payout from the Exchange. Thus, the

stock broker shall maintain running account for you subject to

the following conditions:

a) Such authorization from you shall be dated, signed by you

only and contains the clause that you may revoke the same at

any time.

b) The actual settlement of funds and securities shall be done

by the stock broker, at least once in a calendar quarter or

month, depending on your preference. While settling the

account, the stock broker shall send to you a ‘statement of

accounts’ containing an extract from the client ledger for

funds and an extract from the register of securities displaying

all the receipts/deliveries of funds and securities. The

statement shall also explain the retention of funds and

securities and the details of the pledged shares, if any.

c) On the date of settlement, the stock broker may retain the

requisite securities/funds towards outstanding obligations and

may also retain the funds expected to be required to meet

derivatives margin obligations for next 5 trading days,

calculated in the manner specified by the exchanges. In

respect of cash market transactions, the stock broker may

retain entire pay-in obligation of funds and securities due from

clients as on date of settlement and for next day’s business,

he may retain funds/securities/margin to the extent of value

of transactions executed on the day of such settlement in the

cash market.

d) You need to bring any dispute arising from the statement

of account or settlement so made to the notice of the stock

broker in writing preferably within 7 (seven) working days from

the date of receipt of funds/securities or statement, as the

case may be. In case of dispute, refer the matter in writing to

the Investors Grievance Cell of the relevant Stock exchanges

without delay.

14. In case you have not opted for maintaining running account and

pay-out of funds/securities is not received on the next working

day of the receipt of payout from the exchanges, please refer

the matter to the stock broker. In case there is dispute, ensure

that you lodge a complaint in writing immediately with the

Investors Grievance Cell of the relevant Stock exchange.

15. Please register your mobile number and email id with the stock

broker, to receive trade confirmation alerts/ details of the

transactions through SMS or email, by the end of the trading

day, from the stock exchanges.

IN CASE OF TERMINATION OF TRADING MEMBERSHIP

16. In case, a stock broker surrenders his membership, is expelled

from membership or declared a defaulter; Stock exchanges

gives a public notice inviting claims relating to only the

“transactions executed on the trading system” of Stock

exchange, from the investors. Ensure that you lodge a claim

with the relevant Stock exchanges within the stipulated period

and with the supporting documents.

17. Familiarize yourself with the protection accorded to the money

and/or securities you may deposit with your stock broker,

particularly in the event of a default or the stock broker’s

insolvency or bankruptcy and the extent to which you may

recover such money and/or securities may be governed by the

Bye-laws and Regulations of the relevant Stock exchange where

the trade was executed and the scheme of the Investors’

Protection Fund in force from time to time.

DISPUTES/ COMPLAINTS

18. Please note that the details of the arbitration proceedings, penal

action against the brokers and investor complaints against the

stock brokers are displayed on the website of the relevant Stock

exchange.

19. In case your issue/problem/grievance is not being sorted out by

concerned stock broker/sub-broker then you may take up the

matter with the concerned Stock exchange. If you are not

satisfied with the resolution of your complaint then you can

escalate the matter to SEBI.

20. Note that all the stock broker/sub-brokers have been mandated

by SEBI to designate an e-mail ID of the grievance redressal

division/compliance officer exclusively for the purpose of

registering complaints.