NSE issued a notification on Clarification to the Rule 8(1)(f) and 8(3)(f) of Securities Contracts (Regulation) Rules, 1957

Sep 22, 2022 | by TeamLease RegTech Legal Research Team

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Secretarial ComplianceThe National Stock Exchange (NSE) on September 22, 2022, referring to exchange circular NSE/COMP/50957 dated January 07, 2022, wherein clarification to the Rule 8(1)(f) and Rule 8(3)(f) of Securities Contracts (Regulation) Rules, 1957 (“SCRR”), was provided in consultation with SEBI and other Stock Exchanges. The illustrative list of activities that are construed as non-compliance to Rule 8(1)(f) and 8(3)(f) of SCRR, if undertaken by a member, were provided vide circular above. 

Points 7 and 10 of the said list of activities are states below. 

“7. Any arrangement with registered clients to borrow funds/loans. 

10. Investments made in group companies such as subsidiaries & associates etc., not in connection with or incidental to, or consequential upon the securities/ commodity derivatives business.

(Ex: Investment in companies engaged in other businesses such as NBFC, Real Estate etc.)” 

The following is clarified: 

Point 7: If the lender (who is also a registered client of a member) is a director, associate or group company, then members, who are constituted as a company, are permitted to take loans from such clients to meet the working capital requirements.

Point 10:

i. Members may form a subsidiary company for undertaking the types of businesses which a member is otherwise permitted to undertake i.e., in connection with or incidental to, or consequential upon the securities/ commodity derivatives business without any approval.

ii. Members may form a subsidiary company, with the prior approval of the Exchange, for undertaking other businesses that are considered useful or necessary for the functioning/ development of capital markets. (Ex: Member’s setting up IT subsidiaries for developing trading/back office related software etc.)

iii. It shall be noted that such investments may be made only from own/ proprietary funds and the client's funds shall not be used under any circumstances. 

[Notification No. NSE/COMP/53802]

 

 


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