(1) observe the highest standards of professional conduct and integrity; (4) carry out strictly the client s instructions;

Transcription

1 SECTION 3 TRADING PRACTICES AND CONDUCT 3.1 ACTING ON BEHALF OF CLIENTS When acting on behalf of clients, a Stockbroker Firm and employees of such Firm who deal with clients shall; (1) observe the highest standards of professional conduct and integrity; (2) act fairly; (3) avoid any conflict of interest which may arise. If a conflict of interest arises, a Stockbroker Firm shall ensure equal and fair treatment to its clients by disclosing such conflict of interest or by declining to act or by taking any other appropriate measures. (4) carry out strictly the client s instructions; (5) exercise due skill, care and diligence; (6) act in good faith; (7) act in the best interest of clients and the integrity of the market; (8) take all reasonable steps to execute client orders promptly; (9) execute client orders on the best available terms; (10) handle orders of clients fairly and in the order in which they are received. Orders of clients or transactions to be undertaken on behalf of clients shall take priority over orders for the account of the Stockbroker Firm, (if the Stockbroker Firm is trading on its own account) or the account of an Employee of the Stockbroker Firm, as defined in these Rules; (11) have procedures to prevent any conflict of interest between its client s trading activities, trading on its own account and/or on account of employee trades; (12) be responsible for the accuracy of all orders entered into the ATS by its employees; (13) ensure that orders are entered in accordance with the ATS Rules and any procedures prescribed in the ATS; (14) not guarantee a client that the client will not suffer any loss as a result of carrying out Securities transactions with the Stockbroker Firm for such client; (15) not share directly or indirectly, the profits or losses in any account of a client. 14 th February

2 3.1.2 Whenever a broker terminal is assigned to an employee working in a Stockbroker Firm, the CSE and the SEC shall be informed of the number of the broker terminal assigned to such employee. No other employee shall use the broker terminal used by another employee without prior notice to CSE and SEC. 3.2 RECORDING OF ORDERS Stockbroker Firms shall within a period of 6 months from the date of adoption of these rules : use a telephone recording system with notice to the client, to record the order instructions including date and time of the order and maintain such telephone recordings as part of its records for at least six(6) years for the purposes of these Rules, or, ensure that the order instructions are received from clients in writing and such written instructions are maintained as part of its records for at least six (6) years for the purposes of these Rules In the event of a complaint made by a client against a Stockbroker Firm relating to a particular transaction, if it is revealed that the order instructions have not been recorded and maintained by the Stockbroker Firm as required in terms of Rule above, it shall be the responsibility of the Stockbroker Firm to provide sufficient proof that the Stockbroker Firm received order instructions from the client pertaining to the disputed transaction. If the Stockbroker Firm fails to do so, the Stockbroker Firm shall be held liable. 3.3 ADVICE TO CLIENTS When providing advice to a client a Stockbroker Firm and employees of such Firm who deal with clients shall act diligently and carefully Stockbroker Firms and employees of such Firms who deal with clients shall disclose, to the best of its ability, all circumstances and risks that could reasonably be expected to affect a client s decision If requested, a Stockbroker Firm and employees of such Firm who deal with clients shall provide all information on a Security available in the ATS; A Stockbroker Firm and employees of such Firm who deal with clients shall not enter into a transaction which may conflict with a client s interests, unless the client is informed of such conflict of interests and consents to the transaction. 14 th February

3 3.4 DISCLOSURE OF CLIENT ORDERS A Stockbroker Firm and employees of such Firm who deal with clients shall not disclose a client s order to any third party unless; (1) the prior written consent of the client is obtained for the disclosure of the information; (2) the disclosure is required under any applicable law or any rules of the CSE/CDS. 3.5 DISCRETIONARY ACCOUNTS A Stockbroker Firm shall not effect transactions in a discretionary account unless the client has given prior written authorization to the Stockbroker Firm to effect transactions for the client without the client's specific instructions Such written authorization given by the client shall clearly state the investment objectives of the client The Chief Executive Officer of the Stockbroker Firm shall approve any arrangement to operate a discretionary account A Stockbroker Firm shall implement internal control procedures to ensure proper supervision of the operation of discretionary accounts Each authorization or acceptance may be terminated by notice in writing by the Stockbroker Firm or the client, as the case may be. 3.6 TRADING AUTHORITY Before accepting any orders from a third party on behalf of a client, a Stockbroker Firm shall first obtain written authorization from the client empowering the third party to trade on behalf of the client through the client s account. 3.7 COMMUNICATION WITH THIRD PARTIES A Stockbroker Firm shall communicate in writing, directly with its clients in respect of statements, bought/sold notes or any other information unless the client has authorized otherwise in writing A Stockbroker Firm shall not allow any person other than the client to collect share certificates, bought/sold notes, cheques or account statements, unless the client has authorized such other person in writing. 14 th February

4 3.8 PROHIBITED TRADING ACTIVITIES UNAUTHORIZED TRADING A Stockbroker Firm and employees of such Firm who deal with clients shall not; (1) execute a buy/sell transaction in a client account without the authority of the client; (2) execute trades contrary to the instructions received from the client; (3) execute its/their personal trades in the account of the client; (4) use the client s account for third party trading; MARKET MANIPULATION AND CREATING A FALSE MARKET (1) Stockbroker Firms and employees of such Firms who deal with clients shall not execute or cause to be executed purchases of any Security listed on the CSE at successively higher prices, or sales of any such Security at successively lower prices for the purpose of: creating or inducing of false, misleading or artificial appearance of activity in such Security, or; (b) unduly or improperly influencing the market price of such Security, or; (c) establishing a price which does not reflect the true state of the market in such Security. (2) Stockbroker Firms and employees of such Firms who deal with clients shall not, for the purpose of creating or inducing a false or misleading appearance of activity in a Security listed on the CSE or creating or inducing a false or misleading appearance with respect to the market in such Security: (b) (c) execute any transaction in such Security which involves no change in the beneficial ownership thereof; or enter any order or orders for the purchase of such Security with the knowledge that an order or orders of substantially the same size at substantially the same price, for the sale of such Security, has been or will be entered by the same or related parties; or enter any order or orders for the sale of any such Security with the knowledge that an order or orders of substantially the same price, for the purchase of such Security, has been or will be entered by or for the same or related parties. 14 th February

5 For the purpose of these Rules, a False Market is defined to include a market in which:- (b) (c) information is false or misleading and/or the Stockbroker Firm or its employee knows or ought to reasonably know that the information is false or misleading. contrived factors are in evidence, such as buyers and sellers acting in collaboration to bring about artificial market prices/to deliberately interfere with the price discovery mechanism; or manipulative or fictitious orders, transactions or other devices have been employed. (Refer Annexure 5 for factors relevant when considering whether an act or practice may breach this rule.) (3) A Stockbroker Firm shall not disseminate information that is false or misleading if the Stockbroker Firm; (b) knows or ought to have reasonably known that the information was false or misleading; has not sufficiently investigated about the truth of the information. (4) A Stockbroker Firm shall immediately inform the CSE if it reasonably suspects, or knows of, any attempted market manipulation, creation of a false market or insider trading EXCESSIVE TRADING (CHURNING) A Stockbroker Firm and employees of such Firm who deal with clients shall not execute buy and sell transactions in a client account without the authority of the client, with the intention of generating commission for the Stockbroker Firm or themselves INSIDER DEALING The Stockbroker Firm and employees of such Firm who deal with clients shall not participate in any insider dealing, or knowingly assist a person in such conduct. For the purposes of these rules, Insider Dealing shall have the same meaning as defined in the SEC Act and any subordinate regulations of the SEC. 14 th February

6 3.8.5 FRONT RUNNING AND USE OF NON-PUBLIC PRICE SENSITIVE INFORMATION FOR TRADING A Stockbroker Firm shall have procedures in place to ensure that its employees do not deal (for the benefit of the Stockbroker Firm, any employee of the Stockbroker Firm or a client) in Securities where the employee concerned effects the dealing in order to front-run pending orders/transactions for or with clients. For the purposes of these rules, Front Running shall have the same meaning as defined in the SEC Act and any subordinate regulations of the SEC. 3.9 COMPLIANCE AND COMPLIANCE REVIEW COMPLIANCE A Stockbroker Firm shall comply with, implement and maintain appropriate measures and procedures to ensure compliance with the law, rules and regulations administered or issued by the SEC, CSE, CDS and the requirements of any regulatory authority, which are applicable to the Stockbroker Firm COMPLIANCE OFFICER A Stockbroker Firm shall appoint a Compliance Officer as set out in Rule of these rules COMPLIANCE REVIEW The Compliance Officer shall carry out checks to ensure compliance with the law, rules and regulations as set out in Rule and submit a Compliance Officer s Report to the CSE on a monthly basis, which shall be before the 20 th day of the following month, in the format prescribed by the CSE from time to time. 14 th February