(1) Three months before the expiry of the period of recognition, a recognised stock exchange desirous of renewal of such recognition may make an application to the 7[Securities and Exchange Board of India] in Form A.
(2) The provisions of rule 3, rule 4, rule 5, rule 5A and rule 6 shall apply in relation to renewal of recognition as they apply in relation to grant of recognition except that the fee payable in respect of an application for renewal of recognition shall be rupees two hundred.
Qualifications for membership of a recognised stock exchange.
8. The rules relating to admission of members of a stock exchange seeking recognition shall inter alia provide that :
(1) No person shall be eligible to be elected as a member if—
(a) he is less than twenty-one years of age;
(b) he is not a citizen of India; provided that the governing body may in suitable cases relax this condition with the prior approval of the 9[Securities and Exchange Board of India];
(c) he has been adjudged bankrupt or a receiving order in bankruptcy has been made against him or he has been proved to be insolvent even though he has obtained his final discharge;
(d) he has compounded with his creditors unless he has paid sixteen annas in the rupee;
(e) he has been convicted of an offence involving fraud or dishonesty;
(f) he is engaged as principal or employee in any business other than that of securities 8[or commodity derivatives] except as a broker or agent not involving any personal financial liability unless he undertakes on admission to sever his connection with such business :
9[***] 10[Provided that nothing herein shall be applicable to any corporations, bodies corporate, companies or institutions referred to in clauses (a) to (n) of sub-rule (8).]
7 Substituted for “Central Government” by the Securities Contracts (Regulation) (Amendment) Rules, w.e.f. 23.12.1996.
8 Inserted by the Securities Contracts (Regulation) (Amendment) Rules, 2003, w.e.f. 28.08.2003.
9 Omitted by the Securities Contracts (Regulation) (Second Amendment) Rules, 2017, w.e.f. 27.06.2017.
Prior to omission it read as under:
“[Provided that no member may conduct business in commodity derivatives, except by setting up a separate company which shall comply with the regulatory requirements, such as, networth, capital adequacy, margins and exposure norms as may be specified by the Forward Market Commission, from time to time:”
(g) 11[***]
(h) he has been at any time expelled or declared a defaulter by any other stock exchange;
(i) he has been previously refused admission to membership unless a period of one year has elapsed since the date of such rejection.
(2) No person eligible for admission as a member under sub-rule (1) shall be admitted as a member unless :—
(a) he has worked for not less than two years as a partner with, or an authorised assistant or authorised clerk or remisier or apprentice to, a member; or
(b) he agrees to work for a minimum period of two years as a partner or representative member with another member and to enter into bargains on the floor of the stock exchange and not in his own name but in the name of such other member ; or
(c) he succeeds to the established business of a deceased or retiring member who is his father, uncle, brother or any other person who is, in the opinion of the governing body, a close relative :
Provided that the rules of the stock exchange may authorise the governing body to waive compliance with any of the foregoing conditions if the person seeking admission is in respect of means, position, integrity, knowledge and experience of business in securities, considered by the governing body to be otherwise qualified for membership.
(3) No person who is a member at the time of application for recognition or subsequently admitted as a member shall continue as such if—
(a) he ceases to be a citizen of India :
Provided that nothing herein shall affect those who are not citizens of India but who were members at the time of such application or were admitted subsequently under the provisions of clause (b) of sub-rule (1) of this rule, subject to their complying with all other requirements of this rule;
(b) he is adjudged bankrupt or a receiving order in bankruptcy is made against him or he is proved to be insolvent;
(c) he is convicted of an offence involving fraud or dishonesty;
(d) 12[* * *]
(e) 13[* * *]
(f) he engages either as principal or employee in any business other than that of securities 14[or commodity derivatives] except as a broker or agent not involving any personal financial liability, provided that— 10 Substituted by the Securities Contracts (Regulation) (Second Amendment) Rules, 2017, w.e.f.
27.06.2017. Prior to substitution it read as under:
“Provided further that nothing herein shall be applicable to any corporations, bodies corporate, companies or institutions referred to in items (a) to (n)10 of the proviso to sub-rule (4).];” Footnote in above amendment read as under- “Substituted for "(a) to (k)" by Securities Contracts (Regulation) (Amendment) Rules, 2014, w.e.f.16.1.2014.” 11 Omitted by GSR 1070(E) dated 15.11.1988 12 Ibid.
13 Ibid.
(i) the governing body may, for reasons, to be recorded in writing, permit a member to engage himself as principal or employee in any such business, if the member in question ceases to carry on business on the stock exchange either as an individual or as a partner in a firm,
(ii) in the case of those members who were under the rules in force at the time of such application permitted to engage in any such business and were actually so engaged on the date of such application, a period of three years from the date of the grant of recognition shall be allowed for severing their connection with any such business, 15[(iii) nothing herein shall affect members of a recognised stock exchange which are corporations, bodies corporate, companies or institutions referred to in items [(a) to (n) of sub-rule (8)]16.
(4) A company as defined in the Companies Act, 1956 (1 of 1956), shall be eligible to be elected as a member of a stock exchange if—
(i) such company is formed in compliance with the provisions of section 322 of the said Act;
(ii) a majority of the directors of such company are shareholders of such company and also members of that stock exchange; and
(iii) the directors of such company, who are members of that stock exchange, have ultimate liability in such company.
17[***] 14 Inserted by the Securities Contracts (Regulation) (Amendment) Rules, 2003, w.e.f. 28.08.2003.
15 Substituted, ibid. Prior to its substitution, sub-clause (iii) read as under:
“(iii) nothing herein shall affect members of a recognized stock exchange permitted under the proviso to clause (f) of sub-rule(1) to suspend the enforcement of the aforesaid clause, for so long as such suspension is effective, except that no member of such exchange shall engage in forward business of any kind whether in goods or commodities or otherwise and , if actually so engaged on the date of such application , he shall sever his connection with any such business within a period of three years from the date of the grant of recognition.” 16 Substituted for “items (a) to (n) of the proviso to sub-rule (4)”, by the Securities Contracts (Regulation) (Second Amendment) Rules, 2017, w.e.f. 27.06.2017.
Prior to this, Substituted "(a) to (k)" by Securities Contracts (Regulation) (Amendment) Rules, 2014, w.e.f.16.1.2014 17 Omitted by the Securities Contracts (Regulation) (Amendment) Rules, 2017, w.e.f. 20.03.2017. Prior to omission the proviso read as under- “Provided that where the17[Securities and Exchange Board of India] makes a recommendation in this regard, the governing body of a stock exchange shall, in relaxation of the requirements of this clause, admit as member the following corporations 18[,bodies corporate], companies or institutions, namely :—
(a) the Industrial Finance Corporation, established under the Industrial Finance Corporation Act, 1948 (15 of 1948);
(b) the Industrial Development Bank of India, established under the Industrial Development Bank Act, 1964 (18 of 1964);
18[(c) any insurance company granted registration by the Insurance Regulatory Development Authority under the Insurance Act, 1938 (4 of 1938)]
(d)19 [* * *]
(e)the Unit Trust of India, established under the Unit Trust of India Act, 1963 (52 of 1963);
(f)the Industrial Credit and Investment Corporation of India, a company registered under the Companies Act, 1956 (1 of 1956);
(4A) A company as defined in the Companies Act, 1956 (1 of 1956), shall also be eligible to be elected as a member of a stock exchange if—
(i) such company is formed in compliance with the provisions of section 12 of the said Act;
(ii) such company undertakes to comply with such financial requirements and norms as may be specified by the Securities and Exchange Board of India for the registration of such company under sub-section (1) of section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992);
(iii) 18[* * *]
(iv) the directors of the company are not disqualified from being members of a stock exchange under 19[clause (1) [except sub-clause (b) and sub-clause (f) thereof] or clause (3) [except sub-clause (a) and sub-clause (f) thereof]] and the Directors of the company had not held the offices of the Directors in any company which had been a member of the stock exchange and had been declared defaulter or expelled by the stock exchange; and
(v) not less than two directors of the company are persons who possess a minimum two years’ experience :
(g)the subsidiaries of any of the corporations or companies specified in (a) to (f) and any subsidiary of the State Bank of India or any nationalised bank set up for providing merchant banking services, buying and selling securities and other similar activities.
20[(h)any bank included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934);
(i)the Export Import Bank of India, established under the Export Import Bank of India Act, 1981 (28 of 1981);
(j)the National Bank for Agriculture and Rural Development, established under the National Bank for Agriculture and Rural Development Act, 1981 (61 of 1981); and
(k)the National Housing Bank, established under the National Housing Bank Act, 1987 (53 of 1987).]
21[(l) Central Board of Trustees, Employees' Provident Fund, established under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952);
(m) any pension fund registered or appointed or regulated by the Pension Fund Regulatory and Development Authority under the Pension Fund Regulatory And Development Authority Act, 2013 (23 of 2013); and
(n) any Standalone Primary Dealers authorised by the Reserve Bank of India constituted under the Reserve Bank of India Act, 1934 (2 of 1934)]” Note- Footnotes for the above amended portion are as under- 17 Inserted by the Securities Contracts (Regulation) (Amendment) Rules, 2003, w.e.f. 28.08.2003.
18 Substituted for" the Life Insurance Corporation of India, established under the Life Insurance Corporation Act, 1956 (31 of 1956)" by Securities Contracts (Regulation) (Amendment) Rules, 2014, w.e.f.16.1.2014 19 Omitted, by Securities Contracts (Regulation) (Amendment) Rules, 2014. w.e.f.16.1.2014. Prior to its omission, item (d) read as under:
"the General Insurance Corporation of India constituted under the General Insurance Corporation (Nationalisation) Act, 1972 (57 of 1972)" 20 Inserted, ibid.
21Inserted by Securities Contracts (Regulation) (Amendment) Rules, 2014. w.e.f.16.1.2014 18 Omitted by GSR 749 (E), dated 12.10.1994 19 Substituted by GSR 790(E), dated 07.11.1994
(a) in dealing in securities; or
(b) as portfolio managers; or
(c) as investment consultants.
(5) Where any member of a stock exchange is a firm, the provisions of sub-rules (1),
(3) and (4), shall, so far as they can, apply to the admission or continuation of any partner in such firm.
20[(6) A limited liability partnership as defined in the Limited Liability Partnership Act, 2008 (6 of 2009), shall also be eligible to be elected its a member of a stock exchange if
(i) such “limited liability partnership” undertakes to comply with such financial requirements and norms as may be provided by the Securities and Exchange Board of India for registration of such limited liability partnerships under subsection (1) of section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992);
(ii) the designate partners of the ‘limited liability partnership’ are not disqualified from being members of a stock exchange under sub-rule (1) [except clause (b) and (f) thereof] or sub-rule (3) [except clause (a) and clause (f) thereof and the designated partners of the 'limited liability partnership' had not held the offices of Directors in any company or body corporate or partner in any firm or 'limited liability partnership', which had been a member of the stock exchange and had been declared defaulter or expelled by the stock exchange; and
(iii) not less than two designated partners of the 'limited liability partnership' are persons who possess a minimum experience of two years:-
(a) in dealing in securities; or
(b) as portfolio managers; or
(c) as investment consultants.]
21[(7) Any provident fund represented by its trustees, of an exempted establishment under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952), shall also be eligible to be elected as a member of a stock exchange.]
22[(8) Where the Securities and Exchange Board of India makes a recommendation, the governing body of a stock exchange shall, admit as member the following corporations, bodies corporate, companies or institutions, namely :- 20 Inserted by the Securities Contracts (Regulation) Amendment Rules, 2013. w.e.f. 24.10.2013 21 Sub-rule (7) inserted by the Securities Contracts (Regulation) (Second Amendment) Rules, 2014, w.e.f. 22-9-2014.
22 Inserted by the Securities Contracts (Regulation) (Amendment) Rules, 2017, w.e.f. 20.03.2017.
(a) the Industrial Finance Corporation, established under the Industrial Finance Corporation Act, 1948 (15 of 1948);
(b) the Industrial Development Bank of India, established under the Industrial Development Bank Act, 1964 (18 of 1964);
(c) any insurance company granted registration by the Insurance Regulatory Development Authority under the Insurance Act, 1938 (4 of 1938);
(d) the Unit Trust of India, established under the Unit Trust of India Act, 1963 (52 of 1963);
(e) the Industrial Credit and Investment Corporation of India, a company registered under the Companies Act, 1956 (1 of 1956);
(f) the subsidiaries of any of the corporations or companies specified in clauses (a) to (e) and any subsidiary of the State Bank of India or any nationalised bank set up for providing merchant banking services, buying and selling securities and other similar activities;
(g) any bank included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934);
(h) the Export Import Bank of India, established under the Export Import Bank of India Act, 1981 (28 of 1981);
(i) the National Bank for Agriculture and Rural Development, established under the National Bank for Agriculture and Rural Development Act, 1981 (61 of 1981);
(j) the National Housing Bank, established under the National Housing Bank Act, 1987 (53 of 1987);
(k) Central Board of Trustees, Employees' Provident Fund, established under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952);
(l) any pension fund registered or appointed or regulated by the Pension Fund Regulatory and Development Authority under the Pension Fund Regulatory And Development Authority Act, 2013 (23 of 2013);
(m) any Standalone Primary Dealers authorised by the Reserve Bank of India constituted under the Reserve Bank of India Act, 1934 (2 of 1934); and
(n) Category I and Category II foreign portfolio investors registered under the Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2014:
Provided that such foreign portfolio investors shall engage only in proprietary trades in such class of securities as may be specifically permitted for them by the Securities and Exchange Board of India.]
Contracts between members of recognised stock exchange.
9. All contracts between the members of a recognised stock exchange shall be confirmed in writing and shall be enforced in accordance with the rules and bye-laws of the stock exchange of which they are members.
23[Nominees of the Securities and Exchange Board of India] on the governing bodies of recognised stock exchanges.
10. The 24[Securities and Exchange Board of India] may nominate one or more persons not exceeding three in number, as member or members of the governing body of every recognised stock exchange. Such member or members shall enjoy the same status and powers as other members of the governing body.
Obligation of the governing body to take disciplinary action against a member if so directed by the 25[Securities and Exchange Board of India].
11. After receiving the report of the result of an enquiry made under clause (b) of subsection (3) of section 6 of the Act, the 21 [Securities and Exchange Board of India] may take such action as they deem proper and, in particular, may direct the governing body of the stock exchange to take such disciplinary action against the offending member, including fine, expulsion, suspension or any other penalty of a like nature not involving the payment of money, as may be specified by the 21[Securities and Exchange Board of India]; notwithstanding anything to the contrary contained in the rules or bye-laws of the stock exchange concerned, the governing body shall give effect to the directions of the 21[Securities and Exchange Board of India] in this behalf and shall not in any manner commute, revoke or modify the action taken in pursuance of such directions, without the prior approval of the 21[Securities and Exchange Board of India]. The 21[Securities and Exchange Board of India] may, however, either of its own motion or on the representation of the member concerned, modify or withdraw its direction to the governing body.
Audit of accounts of members.
12. Every member shall get his accounts audited by a chartered accountant whenever such audit is required by the 21[Securities and Exchange Board of India].
Withdrawal of recognition.
13. The written notice referred to in section 5 of the Act shall be in Form C.
Books of account and other documents to be maintained and preserved by every recognised stock exchange.
23 Substituted by F. No. 1/37/SE/94, dated 26.10.1994.
24 Ibid.
25 Substituted for “Central Government” by the Securities Contracts (Regulation) (Amendment) Rules, 1996, w.e.f. 23.12.1996.
14. Every recognised stock exchange shall maintain and preserve the following books of account and documents for a period of five years:
(1) Minute books of the meetings of—
(a) members;
(b) governing body;
(c) any standing committee or committees of the governing body or of the general body of members.
(2) Register of members showing their full names and addresses. Where any member of the stock exchange is a firm, full names and addresses of all partners shall be shown.
(3) Register of authorised clerks.
(4) Register of remisiers of authorised assistants.
(5) Record of security deposits.
(6) Margin deposits book.
(7) Ledgers.
(8) Journals.
(9) Cash book.
(10) Bank pass-book.
Books of account and other documents to be maintained and preserved by every member of a recognised stock exchange.