Compliance FAQs

• The Exchange’s Circular no. ACE/L&C-001/2010/001 dated October 26, 2010 provides the detailed procedure for client registration including Client registration form, Member client agreement and the Risk Disclosure Document.

• Refer Annexure to Circular no. ACE/L&C-001/2010/001 dated October 26, 2010.

• Yes. In addition to other documents, Electricity bills / telephone bills (except cell phone bills) can also be collected as an address proof along with KYC forms but such bills should not be more than three months old at the time of client registration.

• According to clarification provided by Forward Markets Commission, members may exempt individual clients residing in the state of Sikkim from PAN requirements. But the members need to ensure that a system of proper verification exists to verify that such clients are residents of the state of Sikkim.

• No. Members may not insist upon copies of income tax return.

• No. Separate member client agreement is to be executed for each of the commodity exchange for which member is offering broking services to the client.

• Deletion / Removal of any of the clauses from the KYC documents prescribed by the Exchange is not permitted. Further, the Know Your Client (KYC) documents required to be signed by clients shall not contain inequitable, onerous or unreasonable conditions imposed on clients such as:
  

  • Waiver to the Member from sending contract notes
  • Retaining the M-T-M (mark to market) gains by the Member with himself
  • Any condition which gives the member the freedom to trade on behalf of the client without the explicit and specific order issued by the client.

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Issuance of Contract Note and Brokerage

• The contract notes should be in the format prescribed by the Exchange in the Annexure to the Business Rules of the Exchange.

• The contract notes should be dispatched within 24 hours of the transactions made by or on behalf of the client.

• The contract notes shall be numbered with unique running serial number commencing from one which shall be reset only at the beginning of every financial year. In case separate series are maintained in respect of different dealing offices of the member, then the dealing office name or code shall be prefixed to the serial number.

• Yes. The delivery of contract note to client must be in a physical form only, unless a client specifically indicates his preference for contract notes in electronic form. Please refer Circular no. ACE/L&C-008/2011/046 dated May 2, 2011.

• No. The declaration needs to be obtained from the client afresh before 1st April of every financial year by following the same procedure. Thus, such declaration would be valid for that financial year only.

• In case electronic contract notes are delivered to the clients, the member need not issue physical contract notes.

• Yes. The member shall charge brokerage separately to their constituents and this shall be indicated separately from the price, in the contract note.

• There is no directive from the Exchange or Forward Markets Commission on any limit on the Commission / Brokerage that can be charged by the member. Further, there is no minimum brokerage prescribed by the Exchange till date.

Books of accounts / Records to be maintained

• The books of accounts / records that are required to be maintained and the time period for which it has to be maintained by the members of the Exchange have been detailed in Business Rule (7) pertaining to Records, Annual Accounts and Audit.

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Anti Money Laundering

• The members / clients may refer Circular no. ACE/L&C-006/2010/032 dated November 20, 2010.

• Members/intermediaries are required to designate a senior management officer located at head/corporate office as Principal Officer. The name, designation and addresses of the Principal Officer are required to be intimated to the office of the Director - Financial Intelligence Unit (FIU) - India. Please refer to Circular No. ACE/L&C-006/2010/032 dated November 20, 2010.

• Members/Intermediaries are required to report below mentioned transactions in the prescribed format:

  • Cash Transactions
  • Suspicious Transactions

• The Cash Transaction Reports, wherever applicable, for each month should be reported to FIU-IND by 15th of succeeding month in the format prescribed in Annexure I to ACE/L&C-006/2010/032 dated November 20, 2010. The suspicious Transaction Reports should be reported within 7 days of arriving at a conclusion that any transaction, whether cash or non-cash, or a series of transactions integrally connected are of suspicious nature in the format prescribed in Annexure II to ACE/L&C-006/2010/032 dated November 20, 2010.

Inactive Client Accounts

• Refer Circular no. ACE/L&C-007/2011/045 dated April 27, 2011 on Inactive Client Accounts.

• The ‘Inactive Client’ would be one who has not executed any trade during the last six months.

• Member can obtain an undertaking in the prescribed format from the inactive client, prior to allowing any trade to take place in the Inactive client account, to the effect that:
  

  • The client is desirous to reactivate the trading account
  • He has already completed KYC formalities at the time of originally enrolling with the member
  • There is no material change in respect of the information contained in the said KYC

  If there are any material changes in respect of the said client, viz., address, bank account, PAN, etc. then the KYC formalities are required to be complied with afresh. Please refer Circular no. ACE/L&C-007/2011/045 dated April 27, 2011

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Advertisements

• No. The members need not obtain prior approval of the Exchange for issuance of advertisement.

• Yes. The Exchange has given an Advertisement Code for the members vide Circular no. ACE/L&C-007/2010/037 dated December 10, 2010.

• The Members are not permitted to use the Logo of the Exchange in any manner whatsoever.

Office Management

• Members have to ensure that the prescribed details are displayed at a prominently visible location at their main/branch offices and also at the offices of the authorised person. Please refer Circular no. ACE/L&C-008/2010/038 dated December 10, 2010.

Fund Management

• The member shall make pay out of funds, to the constituent within 24 hours of receipt of the payout from the Exchange or within such time as may be prescribed by the Exchange.

• A detailed statement of accounts must be sent every month to all the clients in physical form. The proof of delivery of the same should be preserved by the member. Refer Circular. No. ACE/L&C-008/2011/046 dated May 2, 2011. The statement shall also state that the client shall report errors, if any, in the statement within 30 days of receipt thereof to the member.

• Members should ensure that margins collected from their clients are:
  

  • Highly liquid in nature
  • In the ownership of the depositing client
  Collateral deposits by the client with the Members should be liquid enough to be used to fulfill the client’s margin / settlement requirement at the short notice. Further, they should desist from accepting third party collaterals and illiquid collaterals like immovable properties against the margin / settlement requirements of their clients.

Unique Client Codes (UCC)

• It is mandatory for all the members to allot a Unique Client Code (UCC) for all their clients. Multiple client codes shall not be given to a single client.

• Members shall be required to maintain and preserve, for a period of seven years, a mapping of client IDs used at the time of order entry in the trading system with those unique client codes along with the client name, address and other particulars given in the Know Your Client (KYC) form.

Miscellaneous

• Pursuant to directives of the Forward Markets Commission (FMC) the members are not allowed to undertake any advisory services in the nature of portfolio advisory services, portfolio management services and advisory services resulting in fund based portfolio management services to clients for investment in commodities future contracts.

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