All the Trading Members are requested to note that with a view to facilitate effective surveillance at the Member level, the Exchange would provide the below mentioned alerts based on the trading activity on the Exchange.
Transactional Alerts:
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Sr.No.
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Transactional Alerts
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Periodicity
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1
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Significantly increase in client activity
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Monthly
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2
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Sudden trading activity in dormant account
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Monthly
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3
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Concentrated position in the Open Interest
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Daily
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4
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High Turnover concentration
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Weekly
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The above transactional alerts are an indicative list. Trading Members may also formulate their own alerts in addition to the above mentioned type of alerts as per their surveillance policy.
The following activities are also required to be carried out by the Trading Members based on UCC parameters:
· Client(s) Information:
Trading Members are required to carry out the Due Diligence of its client(s) on a continuous basis. Further, Trading Members shall ensure that key KYC parameters are updated on a periodic basis as prescribed by SEBI and latest information of the client, including information pertaining to directors/ partners/ trustees/ karta in case of non-individual clients, is updated in UCC database of the Exchange. Based on this information the Trading Member shall establish groups/ association amongst clients to identify multiple accounts/ common account/ group of clients. Trading members are also required to profile their clients and categorize the clients under one of the category, namely, Commercial participant (value chain participant/ exporter/ importer, hedger, etc.) or Non-commercial participant (financial participant/ trader/ arbitrager, etc.)
· Analysis:
In order to analyze the trading activity of the Client(s)/ Group of Client(s) or Commodity identified based on above alerts, the Trading Members are required to:
a. Seek explanation from such identified Client(s)/ Group of Client(s) for entering into such transactions.
b. Seek documentary evidence such as bank statement/ warehouse receipt (for commodities with compulsory delivery) or any other documents to satisfy itself.
1. In case of funds, Bank statements of the Client(s)/ Group of Client(s) from which funds pay-in have been met, to be sought. In case of commodities with compulsory delivery, documentary evidence including warehouse receipt of the Client(s)/ Group of Client(s) for which commodities pay-in have been met, to be sought.
2. The period for such statements may be at least +/- 15 days from the date of transactions to verify whether the funds for the settlement of such trades actually belongs to the client for whom the trades were transacted.
c. After analyzing the documentary evidences, including the bank statement/ warehouse receipt, the Trading Member shall record its observations for such identified transactions for Client(s)/ Group of Client(s). In case where adverse observations are recorded, the Trading Member shall report all such instances to the Exchange within 45 days of the alert generation. The Trading Member may seek extension of the time period from the Exchange, wherever required.
· Monitoring and reporting:
a. For effective monitoring, Trading Member shall:
1. Frame a surveillance policy covering:
i. Receipt of Alerts from Exchange/ generated at member's end.
ii. Time frame for disposal of alerts and if there is any delay in disposal, reason for the same shall be documented.
iii. Suspicious/ Manipulative activity identification and reporting process
iv. Record Maintenance
2. The surveillance policy of the Trading Member shall be approved by its Board (in case of corporate trading member), Partners (in case of partnership firms) or Proprietor (in case of sole proprietorship firm) as the case may be.
3. A quarterly MIS shall be put up to the Board (in case of corporate trading member), Partners (in case of partnership firms) or Proprietor (in case of sole proprietorship firm) on the number of alerts pending at the beginning of the quarter, generated during the quarter, disposed off during the quarter and pending at the end of the quarter. Reasons for pendency shall be discussed and appropriate action taken. Also, the Board (in case of corporate trading member), Partners (in case of partnership firms) or Proprietor (in case of sole proprietorship firm) shall be apprised of any exception noticed during the disposal of alerts.
4. The surveillance process shall be conducted under overall supervision of its Compliance Officer.
5. Designated Directors/ Partners/ Proprietor/ Compliance Officer would be responsible for all surveillance activities carried out by the Trading Member and for the record maintenance and reporting of such activities.
b. Internal auditor of Trading Member shall review the surveillance policy, its implementation, effectiveness and review the alerts generated during the period of audit. Internal auditor shall record the observations with respect to the same in their report. This will be effective as and when the internal audit guidelines become applicable for trading members.
The above guidelines are illustrative and not exhaustive. Based on facts and circumstances, the trading members are required to exercise their independent judgment and take adequate precaution.
The aforesaid process shall be applicable for the above alerts, downloaded to the Trading Members through e-BOSS (Member Surveillance System) with effect from December 1, 2018. The Trading Members are requested to analyse these alerts and revert in case of adverse observations, if any, to the Exchange at bse.Commsurv@bseindia.com.
In case of any clarifications, members are requested to contact 2272 5175/ 2272 8580.
For & On behalf of BSE Ltd
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Usha Sharma
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Umesh Hanjankar
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Addnl. General Manager
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Asst. General Manager
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Surveillance
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Surveillance
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November 28, 2018 |