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Risk Management Policy

Berkeley Securities Ltd. (BSL)

1. Preface

Risk Management is an integral part of any organisation. We need to deal with various kind of risk like credit Risk, Market Risk, default Risk, liquidity Risk and other risk.

In Securities Market, customers have to be alerted with respect to their obligations, open positions, market conditions, Margin requirements, regulatory requirements and steps are initiated by the brokers in case of changing market situations.

With a view to enhance customer knowledge and safeguarding investor interests, BSL have devised a comprehensive Risk Management & Surveillance (RMS) Policy to make sure that customers are aware of criteria based on which BSL monitors risk and initiates actions to safeguard the interest.

Major parameters of RMS Policy are mentioned below:

2. Setting Up Clients Exposure Limit:
Cash Segment:

Exposure constitutes both a purchase and sale transactions of shares & securities. A purchase transaction includes buying of securities and it remains as Exposure till client gives full payment for the shares bought. A sale involves a share delivery obligation to the Exchange and it remains an Exposure till the client delivers the shares. Exposure will mean the aggregate of the outstanding purchases and sales.

Exposure limit of the client will be set on the basis of available base capital as defined below. The limits may be allowed on a multiplier basis to the available base capital depending on the market conditions and the risk perception about the market / client. However in exceptional situations BSL may use its own discretion in providing the limits and may change for a client or for all depending on market conditions.
Base Capital constitutes of Margin Ledger +/- Party Ledger + Collateral Stocks (Stocks given to BSL as Margin) + Outstanding Stocks (Socks yet to receive from Exchange) – Shortages (Stocks sold but not delivered to broker for pay-in within T+2 days ) + Value of Stocks held in Demat Account (where Power Of Attorney is given)

# All stocks are valued after applicable hair cut applied by BSL.

  • The market would be categorized as Panic Market if the index movement is 6% in a single day or a cumulative movement of 10% (either side movement) in consecutive sessions or is declared specifically by MOSL in case of emergency for the limited purpose of this Risk Management Policy.

Customer can utilize the limit as per his desire for the available product. In case the same is used for one product then the limit will be adjusted for other product automatically. Further trading limits are provided only on realized cheques or fund transfer done using payment gateway option

# The above exposure limits can be reduced to one time based on clients profile & BSL’s risk appetite, Market Conditions etc.

# In addition to above, BSL applies specific scrip wise Margin, hence few scrips can attract higher Margin than the normal margin available for liquid scrips, this can vary in the range of 50% to 100%.

In other case the Exchange increases the Margin requirement in any scrip, BSL can reduce the Exposure in that particular scrip as per the Exchange Margin requirement i.e. Say Exchange has increased the Margin in Scrip XYZ Ltd by 100%, MOSL may reduce the Exposure to half in XYZ Ltd. Apart from this scrip, client will be having Normal Exposure in total as per above guidelines.

F & O & Currency Segment:

Trading Limits will be allowed on the basis of available base capital as mentioned above in the policy

Derivative Segment is a Margin driven segment. Margin will be collected as per the requirement of the Exchange. i.e. SPAN Margin + Exposure Margin + Additional Margin + Special Margin ( if any made applicable by the Exchange ). In case of panic market additional margin can be collected by BSL looking at market conditions.

Scrip’s acceptable as collateral – Only approved list of stocks as per exchange guidelines for Margin will be accepted after applying applicable haircut as prescribed by Exchange. However BSL may accept ,on its own discretion, the stocks which are not in the list of Exchange defined illiquid Scrip.

Further to fulfill the Exchange Margin requirement, BSL may pull the shares equivalent to margin requirement from clients DP Account based on POA given by client.

On the basis of available Funds and Collaterals, Margin Reporting of the Clients will be done to Exchanges and Shortfall Penalty if any will be debited in Clients ledger Statement.

3. Right to sell clients securities (RMS selling) or close clients positions on account of nonpayment
of client dues:

It is client’s obligation to clear his obligations on T+2 days (T indicates Trading day). The client shall timely provide funds / securities to BSL for the purchase / sale of securities for meeting his obligations to the Exchange. In case of client falling short of providing fund / securities, BSL has the right to close the positions / sell the clients securities with or without giving prior notice to client to the extent of ledger debit and / or to the extent of margin obligations. BSL can liquidate the securities bought or collaterals given or any other securities given by client in any other form for clearing the clients obligations.

Further Client will be suspended from Trading on RMS selling day and suspension would be removed after selling. This is done only to avoid duplication of selling (i.e. by customer on his Own as well as by RMS of BSL)

RMS Selling criteria in Cash Segment
RMS selling in clients account will be done on T+5 days (T indicates Trading day) for the Ledger debit on due basis. For example, if the position has been taken on Monday then the funds payment is due on Wednesday (T+2 day). Shares so bought on Monday will be withheld by BSL till the debit is cleared. If the funds are not received by Friday, shares will be sold on following Monday.

Incase stock valuation falls below 20% of the total ledger debit, square off can be done even before T+5 days.

Client is updated that he will be placed on Square off mode in case Ledger debit is not cleared in Cash segment on T+7 day ( working days)

RMS Selling criteria in F & O Segment:
In case of F&O segment, RMS selling will be done on T+2 basis for the Mark to Market (MTM) debit / Margin Shortfall.

If MTM reaches 80% of the deposit RMS selling can be done even before above stipulates days.

In case of panic market conditions, RMS selling will be done on T+1 basis.

Selling sequence when BSL does RMS selling:
i) The open position in F&O Segment will be squared off towards margin shortage.
ii) In case there is ledger debit in client’s accounts, collateral stocks to the extent of ledger debit (including MTM) will be sold off.
Client is updated that he will be placed on Square off mode in case Ledger debit is not cleared in Cash segment on T+6 day ( working days)

4. Other Surveillance Actions:
i) Refusal of order for penny stocks / illiquid contracts:
BSL may refuse or restrict a client in placing the order in certain securities depending on various conditions like volume / value / part of illiquid scrip’s / Z group of securities although a client may have credit balance or sufficient margin in the trading account. However BSL under exceptional circumstances may execute clientele order. BSL has the discretion to reject execution of such orders based on its risk perception.
In case of F&O segment, all the far Month Option contracts and third Month Option Contract (Except Nifty) will not have buy and sell limit due to its illiquid nature, However in all above cases if client still wish to trade then the client needs to coordinate with the respective branch and the limit will be set by Head Office after analyzing the requirement.
ii) Regulatory conditions under which a client may not be allowed to take further position or BSL may close the existing position of the client:
In case overall position in a scrip / derivatives contract has reached the Regulators prescribed Exchange limit / Market wide open interest limit / Client level limit, then client may not be allowed to take further positions, till such time Regulators prescribed limit comes down to create a new position.
Further BSL may close the existing position of a client to the extent of debit balances to release the margin from the Exchange. In case if BSL has sufficient margin cover on behalf of its clients, it may still decide based on the market conditions and risk perception not to allow further position or may close the existing position of a client.
iii) PMLA Guidelines:
Client will be categorized as High, Medium and Low risk customer as per their risk appetite and their current profile as mentioned in Know your client form (KYC). The same will be reviewed at regular intervals as per PMLA Policy of BSL.
Exposure to client may also be governed by customer profiling mentioned above as well as clients financial income made available to BSL from time to time. Client needs to furnish their income details on yearly basis. Following documents will be accepted as a income proof

  • Copy of ITR Acknowledgement
  • Copy of Annual Accounts
  • Copy of Form 16 in case of salary income
  • Net worth certificate
  • Salary Slip
  • Bank account statement for last 6 months
  • Copy of demat account Holding statement.
  • Any other relevant documents substantiating ownership of assets.

If there is a major disparity between financial details and trading volumes, client will be asked to furnish suitable explanation and based on the same further trading limits will be sanctioned.
iv) Suspension of Clients:
BSL may withhold the payout of client and suspend his trading account due to any internal surveillance (if client indulges into manipulative trade practice) / regulatory orders (debarring orders) / etc.

5. Quarterly / Monthly Settlement
The customer accounts are maintained with BSL on running account basis for operational convenience as per consent given by them at the time of Account opening. However customer accounts needs to be settled once every quarter as per the policy adopted by Berkeley Securities Ltd. As per the policy, only account with balance of more than Rs.10000/- will be settled quarterly and all account with balance upto Rs.10000/- will be treated as settled. In case of client is having debit balance in his ledger, his account will not qualify for Quarterly Settlement or will be treated as settled for that quarter. In case client is trading in F&O or in Currency segment he has to maintain the margin up to 225%. Quarterly settlement will be done across all Exchanges and segments and amount as per prevailing regulations may be retained at the time of settlement.

6. Communication
As per Regulatory requirements we send Statement of Accounts of Funds & Securities, Collateral Statement, DP Statements, Contract Notes Daily Margin Statements etc.. Client can view these statements also through his secured login on BSL website. The client has to be aware about his position, outstanding balance and Risk. BSL is under no legal obligation to send any separate communication but as a customer centric company we may take extra efforts generally to ensure that client is well informed about the Risk and the possible actions, which may follow. The communication would generally be through SMS / Email on registered contact details with BSL.

7. Disclaimer
BSL Management will have a discretion to alter/change any of Exposure limit , selling parameter defined in this policy on the basis of prevailing market conditions with or without prior intimation and can use their discretion to grant any kind of exemption/permission in case they deem fit on case to case basis

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