Client Code Modification Policy – Rules, Process & Guidelines
Stock Exchanges provide a facility to modify client code after the trade has been executed to rectify any error or wrong data entry at the time of punching orders. However, such Client Code Modification is subject to certain guidelines issued by SEBI and the Stock Exchanges in this regard.
“Error Trades” means the trades which will be modified / to be modified / allowed, to be modified subject to guidelines of the SEBI / Stock Exchanges and this policy. The Exchange has provided the facility of client code modification only with a view to rectify genuine errors.
The facility is mainly to provide a system for modification of client codes in case of genuine errors in punching / placing the orders. It is to be used as an exception and not a routine. To prevent misuse of the facility Stock Exchanges levy penalty / fine for all non-institutional client code modifications.
This policy is applicable to all Client Code Modifications carried out / to be carried out in any of the client accounts, subject to guidelines issued by the SEBI / Stock Exchanges from time to time, in any segment of any exchange of which the company is a member.
The following client code modifications would be considered as genuine modifications, provided there is no consistent pattern in such modifications:
a. Where original client code/name and modified client code/name are similar to each other but such modifications are not repetitive.
b. Where original client code and modified client code belong to a family. (Family for this purpose means spouse, dependent parents, dependent children and HUF)
However, there may also be a need to resort to client code modification in following situations:
a. Punching error / typing error of client codes due to any genuine error or mistake in order entry, while punching the order, by any of dealer.
b. Trade entered for wrong client due to any miscommunication from the client/ authorized representative of the client.
The facility for Client Code Modification can be used only in case of Error Trade and the Client Code Modification shall be carried out only after obtaining approval of any of the Designated Directors of the Company and in their absence that of Compliance Officer subject to the process as may be prescribed by SEBI / Stock Exchange.
However, it needs to be reiterated that in all cases adequate precautions need to be taken while placing/executing orders so as to minimize the need for resorting to client code modification.
The penalty or fine, if any, levied on the Company for any wrong trade due to any miscommunication from the client / authorized representative of the client shall be borne by the client.
Online Client Code Modification:
Online client code modification is permitted exclusively for rectifying genuine punch or typing errors, requiring strict authorization from senior management, compliance officers, or directors, and is not for routine use. Such modifications must follow exchange-mandated, board-approved policies, often involving designated error accounts, detailed documentation, and, for non-institutional clients, penalties from stock exchanges.
Key Requirements for Online Client Code Modification:
Authorized Personnel Only: Modification rights are restricted to corporate managers, compliance officers, or directors, never to branch staff, sub-brokers, or authorized persons.
Approval & Process: Modifications require approval from the Senior Management or Head of Dealing after reviewing the genuineness of the error.
Documentation: A detailed, maintained, and auditable record (Error Log/Register) is required for every modification, documenting the error code, correct code, security, quantity, and client name.
Genuine Error Criteria: Acceptable modifications include swapping codes between similar names or correcting typing errors, provided they are not repetitive.
Exchange Compliance: The process must adhere to SEBI and stock exchange guidelines (e.g., NSE/BSE) regarding error accounts.
.png)
ATTENTION INVESTORS!
-
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.”