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Client Code Modification

Review of Policy for Client Code Modification

SEBI Circular No. CIR/DNPD/6/2011 dated 5th July 2011 indicated change in procedure for client code modification of orders which was subsequently notified by NSE as per Circular No.NSE/INVG/2011/18484 dated 29th July, 2011. After framing of policy for modification of client code in September 2011, the dealers/traders were cautioned /warned to prevent any wrong punching of client code while executing the orders of the client. They were advised that before putting in the order they must check and verify the code number, quantity, name of the script failing which they shall be held responsible and accountable for any wrong feeding of data. The dealers/traders are expected to take utmost care/precaution while executing the trades of the clients.

It was also noted that as per Circular No. NSE/INVG/2011/18716 dated 26th August 2011 modification in client code was only permitted in the following cases:

  1. Any error due to communication and/or punching or typing the original client code/name and modified client code/name is similar to each other.
  2. Modification of codes within “Relatives” defined under Sec. 6 of the Companies Act, 1956.

According to the Circular errors have been defined in two categories as genuine or non-genuine. It was further noted that any genuine error while placing the order consisting of family codes including spouse, dependent parents, dependent children and HUF are allowed to be changed from one code to another provided the client agrees to take the responsibility of bearing the burden of penalty, if any, being imposed by the Stock Exchange at any subsequent date. This relaxation is only for trade modification where there are no consistent patterns in client code modification and which are not repetitive. It was noted that the caution had made substantial improvement in client code punching mistakes after the policy was made and implemented.

Accordingly, an “ERROR ACCOUNT” in the name of PKC Stock Broking Pvt. Ltd. has been registered as a fresh Client Code No. 12345 in Back Office and the same has also been uploaded in the UCC database of the Exchange. Any transfer of trade to “ERROR ACCOUNT” would not be treated as modification of client code and would not attract any amount of penalty provided the trades in “ERROR ACCOUNT” are subsequently liquidated in the market and not shifted to any other client code. However, operational cost as applicable & profit and loss from the transaction will be transferred to the said dealer/client and have to be recovered from them who is at fault. The decision of the company on the matter of who shall pay penalty shall be final on the basis of checklist prepared to identify the person who has defaulted It was decided that the request for client code modification shall only be accepted till 3.30 P.M. IST.

It was also decided to allow modification in client code only if the client gave a written request to the Compliance Officer indicating his/her willingness to bear any charges/penalty as levied by the exchange from time to time in case as mentioned in point no 1 & 2 above. In all other cases if the client does not want to accept any penalty if levied by the Exchange, the disputed trade has to be shifted to “ERROR ACCOUNT” and liquidated/closed out in the market without shifting the same to any other client code. All levies as applicable in relation to client code modification shall be charged as & when any such charge is levied by the exchange on the company. In case of multiple such cases, PKC Stock Broking Pvt. Ltd. may also impose additional penalty on the dealer/client for repetition of such mistakes.

Under no circumstances Client Code modification between third parties are to be allowed from error account or otherwise.

It has also been decided to review the policy for its proper implementation in case of more client code mistake cases initially on quarterly basis which may be subsequently changed as the situation demands..

The Compliance Officer was advised to communicate this policy to the persons concerned individually at the earliest.

Dated: 19/10/2012