GENERAL OBLIGATIONS AND RESPONSIBILITIES CODE OF CONDUCT
FOR REGSTER TO AN ISSUE AND SHARE TRANSFER AGENTS: A registrar to an
issue and share transfer agent should:
1. Maintain high standards of integrity in the conduct of its business.
2. Fulfill its obligations in a prompt, ethical and professional manner.
3. At all times exercise due diligence, ensure proper care and exercise independent professional judgment.
4. Exercise adequate care, caution and due diligence before dematerialization of securities by confirming and verifying that the securities to be dematerialized have been granted listing permission by the stock exchange(s).
5. Always endeavor to ensure that
(a)Inquiries from investors are adequately dealt with;
(b) Grievances of investors are redressed without any delay;
(c) Transfer of securities held in physical form and confirmation of dematerialization/ rematerialization requests and distribution of corporate benefits and allotment of securities is done within the time specified under any law.
6. Make reasonable efforts to avoid misinterpretation and ensure that the information provided to the investors is not misleading.
7. Not reject the dematerialization/ rematerialization requests on flimsy grounds. Such requests could be rejected only on valid and proper grounds and supported by relevant documents.
8. Avoid conflict of interest and make adequate disclosure of its interest.
9. Put in place a mechanism to resolve any conflict of interest situation that may arise in the conduct of its business or where any conflict of interest arises, should take reasonable steps to resolve the same in an equitable manner.
10. Make appropriate disclosure to the client of its source or potential areas of conflict of duties and interest which would impair its ability to render fair, objective and unbiased services.
11. Not indulge in any unfair competition, which is likely to harm the interests of other registrar to the issue and share transfer agent or investors or is likely to place him in disadvantageous position while competing for or executing any assignment.
12. Always endeavor to render the best possible advice to the clients having regard to their needs. 13. Not divulge to other clients, press or any other person any confidential information
about its clients which has come to its knowledge except with the approval/ authorization of the client or when it is required to disclose the information under any law for the time being in force.
14. Not discriminate among its clients, save and except on ethical and commercial considerations.
15. Ensure that any change in registration status/any penal action taken by the SEBI or any material change in financials which may adversely affect the interest of clients/ investors is promptly informed to the clients.
16. Maintain the required level of knowledge and competence and abide by the provisions of the SEBI Act, rules, regulations, circulars and directions issued by the SEBI and also comply with the award of the Ombudsman under the SEBI (Ombudsman) Regulations, 2003.
17. Co-operate with the SEBI as and when required.
18. Not neglect or fail or refuse to submit to the SEBI or other agencies with which he is registered, such books, documents, correspondence, and papers or any part thereof as may be demanded/requested from time to time.
19. Ensure that the SEBI is promptly informed about any action, legal proceeding, etc. Initiated against it in respect of any material breach or non-compliance by it, of any law, rules, and regulations, directions of the SEBI or of any other regulatory body.
20. Take adequate and necessary steps to ensure that continuity in data and recordkeeping is maintained and that the data or records are not lost or destroyed. Further, it should ensure that for electronic records and data, up-to-date back up is always available with it.
21. Endeavour to resolve all the complaints against it or in respect of the activities carried out by it as quickly as possible.
22. (a) Not render, directly or indirectly any investment advice about any security in the publicly accessible media, whether real-time or non-real time, unless a disclosure of its long or short position in the securities has been made, while rendering such advice; (b) In case an employee of a registrar to an issue and share transfer agent is rendering such advice, the registrar to an issue and share transfer agent should ensure that it also discloses its own interest, the interests of his dependent family members and that of the employer including their long or short position in the security, while rendering such advice.
23. Handover all the records/data and all related documents which are in its possession in its capacity as a registrar to an issue and/or share transfer agent to the respective clients, within one month from the date of termination of agreement with the respective clients within or within one month from the date of expiry/cancellation of certificate of registration as registrar to an issue and/or share transfer agent, whichever is earlier.
24. Not make any exaggerated statement, whether oral or written, to the clients either about its qualifications or capability to render certain services or should its achievements in regard to services rendered to other clients.
25. Ensure that it has satisfactory internal control procedures in place as well as adequate financial and operational capabilities which can be reasonably expected to take care of any losses arising due to theft, fraud and other dishonest acts, professional misconduct or omission.
26. Provide adequate freedom and powers to its compliance officer for the effective discharge of its duties.
27. Develop its own internal code of conduct for governing its internal operations and laying down its standards of appropriate conduct for its employees and officers in carrying out its duties as a registrar to an issue and share transfer agent and as a part of the industry. Such a code may extend to the maintenance of professional excellence and standards, integrity, confidentiality, objectivity, avoidance of conflict of interests, disclosure of shareholdings and interests, etc.
28. Ensure that good corporate policies and corporate governance are in place.
29. Ensure that any person it employs or appoints to conduct business is fit and proper and otherwise qualified to act in the capacity so employed or appointed (including having relevant professional training or experience).
30. Be responsible for the acts or omissions of its employees and agents in respect of the conduct of its business.
31. Not in respect of any dealings in securities be party to or instrumental for: (a) creation of false market, (b) price rigging or manipulations; (c) passing of unpublished price sensitive information in respect of securities which are listed and proposed to be listed in any stock exchange to any person or intermediary.
MAINTENANCE OF RECORDS
The registrars and share transfer agents have to maintain records relating to all applications received from investors in respect of an issue, all rejected applications together with reasons, basis of allotment of securities in consultation with the stock exchanges, terms and conditions of purchase of securities, allotment of securities, list of allottees and non-allotees, refund orders, and so on. In addition, they should also keep a record to the list of holders of securities of Corporates, the names of transfer agents to file the books of accounts, and records, and so on. These have to be preserved by them for a period of three years.
The SEBI is authorized to undertake the inspection of the books of accounts, other records, and documents of the registrars and share transfer agents to ensure that they are being maintained in a proper manner and the provisions of the SEBI Act, rules, regulations and the provisions of the SCRA and the relevant rules are complied with, to investigate into complaints from investors/other registrars and share transfer agents/other intermediaries in the securities market or any matter relating to their activities, and to investigate on its own in the interest of securities market/investors into their affairs. On the basis of the inspection report, the SEBI can direct the concerned partly to take such measures as it deems fit in the circumstances. It can also appoint a qualified auditor to investigate into the books of accounts and affairs of the registrars and share transfer agents.
ACTION IN DEFAULT
A registrar/share transfer agent who fails to comply with any condition subject to which registration is granted, or contravenes any of the provisions of the SEBI Act/SCRA, rules/regulations and stock exchange bye-laws, rules and regulations is liable to suspension or cancellation of registration. The penalty for suspension is imposed for (a) violations of the provisions of the SEBI Act, rules/regulations, (b) non-observance of the code of conduct, (c) failure to furnish information, furnishing of wrong/false information, non-submission of periodical information and non-cooperation in any enquiry, (d) failure to resolve investor complaints or give a satisfactory reply to the SEBI in this behalf, (e) involvement in manipulation/price rigging/ cornering activities, (f) guilty of misconduct/improper business-like or unprofessional conduct business-like or unprofessional conduct, (g) failure to maintain capital adequacy requirement or to pay the requirement or to pay the requisite fee; and (h) violation of the conditions of registration. In case of their repeated defaults, the certificate of registration can be cancelled. The other reasons for cancellation of registration are deliberate manipulation/price rigging/ cornering activities affecting the securities market and the investor interest; violation of the provisions of the SEBI Act, rules/regulations; violation of any provisions of insider trading/ take-over regulations and guilty of fraud/conviction on a criminal offence. The procedure for inspection, holding enquiry and suspension/cancellation is the same as in the case of lead managers, underwriters, bankers to the issue, and so on.