SOP Surveillance Policy – Trading Monitoring & Compliance Framework
Standard Operating Procedure (SOP) for Processing Surveillance Alerts for Depository Participant
Objective
To define the standard procedure for managing and processing surveillance alerts, generated both at the Depository Participant (DP) end and by Depository, ensuring timely, effective, and secure handling of alerts.
Scope
This SOP applies to all surveillance alerts generated through Depository or internally by the DP. It establishes guidelines for alert generation parameters, response timelines, escalation procedures, and regular review requirements.
Roles and Responsibilities
Compliance Officer
Oversees SOP adherence, reviews alert parameters periodically, and ensures process improvement.
Alert Processor (Maker)
Identifies, reviews, and initiates the first level of alert handling.
Checker
Conducts secondary review to validate alert handling and ensures actions meet compliance standards.
Alert Generation Parameters
High-Value Transaction: Alerts for transactions exceeding a predefined threshold.
Transaction in Suspended ISIN: Transactions involving securities under suspension.
Simultaneous Changes in KYC and Demographic Details: When both KYC and personal details change in close proximity.
High-Value Transactions Post-Demographic Change: Large transactions following recent updates to account information.
Considerable Increase in Pledge Invocation: A significant rise in pledging securities within a short time.
Considerable Increase in Pledge: Substantial growth in securities pledged by the account holder.
Account Closed Shortly After Opening: Accounts closed soon after being established.
Off-Market Transfers Following Demographic Changes: Transfers post-changes in account information.
Off-Market Transfers Around Lock-In Period for Preferential Allottees: Transfers occurring during sensitive lock-in periods.
Multiple Demat Accounts with Common Contact Details: Multiple accounts linked by:
- - Mobile number
- - Bank details
- - PAN
- - Email address
Alert for multiple demat accounts opened with same demographic details: Alert for accounts opened with same PAN / mobile number / email id / bank account no. / address considering the existing demat accounts held with the DP.
Alert for communication (emails/letters) sent on registered Email id / address of clients are getting bounced.
Frequent changes in details of demat account such as, address, email id, mobile number, Authorized Signatory, POA holder etc.
Frequent Off-Market transfers by a client in a specified period.
Off-market transfers not commensurate with the income / Net worth of the client.
Pledge transactions not commensurate with the income / Net worth of the client.
Off-market transfers (High Value) immediately after modification of details in demat account.
Review of reasons of off-market transfers provided by client for off-market transfers vis-à-vis profile of the client e.g. transfers with reason code Gifts with consideration, frequent transfers with reason code Gifts/Donation to unrelated parties, frequent transfers with reason code off-market sales.
Alert for newly opened accounts wherein sudden increase in transaction activities in short span of time and suddenly holding in demat account becomes zero or account becomes dormant after some time.
Any other alerts and mechanism in order to prevent and detect any type of market manipulation activity carried out by their clients.
Procedures for Processing Alerts
Alert Identification: Alerts are automatically generated by Depository or DP's internal systems based on predefined parameters.
Initial Review (Maker): The Maker verifies alert details and assesses severity (low, medium, high).
Investigation and Response: Conduct an initial investigation, potentially contacting the relevant account holders for verification.
Final Review (Checker): Checker validates the actions taken by the Maker and confirms closure or escalation of the alert as necessary.
Escalation Procedure
Specific escalation paths depend on alert type and severity, with contacts for:
- - Immediate Supervisors
- - Compliance Officer
Time-lines for Response
Time-lines are as follows:
- - Initial review within 24 hours
- - Investigation and response within 3 business days
- - Final closure within 45 business days or sooner if required
Periodic Review
The Compliance Officer reviews the SOP and alert parameters quarterly to ensure compliance and operational effectiveness.
Maker-Checker Mechanism
The DP follows a Maker-Checker approach, with actions by the Maker validated by the Checker to ensure oversight and compliance.
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ATTENTION INVESTORS!
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Beware of guaranteed returns:
Beware of fixed/guaranteed/regular returns/ capital protection schemes. Brokers or their authorized persons or any of their associates are not authorized to offer fixed/guaranteed/regular returns/ capital protection on your investment or authorized to enter into any loan agreement with you to pay interest on the funds offered by you. Please note that in case of default of a member claim for funds or securities given to the broker under any arrangement/ agreement of indicative return will not be accepted by the relevant Committee of the Exchange as per the approved norms. -
Do not keep funds idle:
Do not keep funds idle with the Stock Broker. Please note that your stock broker has to return the credit balance lying with them, within three working days in case you have not done any transaction within last 30 calendar days. Please note that in case of default of a Member, claim for funds and securities, without any transaction on the exchange will not be accepted by the relevant Committee of the Exchange as per the approved norms. -
Check account settlements:
Check the frequency of accounts settlement opted for. If you have opted for running account, please ensure that your broker settles your account and, in any case, not later than once in 90 days (or 30 days if you have opted for 30 days settlement). In case of declaration of trading member as defaulter, the claims of clients against such defaulter member would be subject to norms for eligibility of claims for compensation from IPF to the clients of the defaulter member. These norms are available on Exchange website at following link: https://www.nseindia.com/invest/about-defaulter-section. -
No direct security transfers:
Brokers are not permitted to accept transfer of securities as margin. Securities offered as margin/ collateral MUST remain in the account of the client and can be pledged to the broker only by way of ‘margin pledge’, created in the Depository system. Clients are not permitted to place any securities with the broker or associate of the broker or authorized person of the broker for any reason. Broker can take securities belonging to clients only for settlement of securities sold by the client. -
Keep contact details updated:
Always keep your contact details viz. Mobile number/Email ID updated with the stock broker. Email and mobile number is mandatory and you must provide the same to your broker for updation in Exchange records. You must immediately take up the matter with Stock Broker/Exchange if you are not receiving the messages from Exchange/Depositories regularly. -
Verify trades regularly:
Don't ignore any emails/SMSs received from the Exchange for trades done by you. Verify the same with the Contract notes/Statement of accounts received from your broker and report discrepancy, if any, to your broker in writing immediately and if the Stock Broker does not respond, please take this up with the Exchange/Depositories forthwith. -
Review weekly statements:
Check messages sent by Exchanges on a weekly basis regarding funds and securities balances reported by the trading member, compare it with the weekly statement of account sent by broker and immediately raise a concern to the exchange if you notice a discrepancy. -
Avoid unauthorized transfers:
Please do not transfer funds, for the purposes of trading to anyone, including an authorized person or an associate of the broker, other than a SEBI registered Stock broker.”