A P P E N D I X IV
CHAPTER 3 - MEMBERSHIP
A CODE OF
CONDUCT
FOR MEMBERS OF
THE
Section I General Principles
1.1
The purpose of this Code is to protect the interest of investors and to
ensure that a member conducts his business in a manner which contributes to the
maintenance of a fair and orderly market in securities.
1.2
A Member shall at all times comply with the following principles in the
conduct of his business by :
a. Honesty
and Fairness
(i)
observing professional standards of integrity and fair dealing;
(ii)
at all times acting honestly and fairly and in the best interests of
his clients; and
(iii)
ensuring that he conducts his business in such a manner as to
contribute to the maintenance of a fair and orderly market.
b.
Diligence
(i) acting with due skill, care and
diligence in the best interest of his clients and the integrity of the market.
c. Capabilities
(i) taking all necessary steps to ensure
that all his employees are fit and proper persons to deal in securities
business;
d.
Information about Clients
(i) taking all reasonable steps to obtain
sufficient financial and other information from each client, as is relevant to
the services to be provided by the Member in respect of trading.
e. Information
for Clients
(i)
making adequate disclosure of all information relevant to his dealing
with and on behalf of that client; and
(ii)
strictly avoid making any misleading or deceptive representations to
his clients.
f. Client
Priority
(i) avoiding to treat a client’s interests
as subordinate to his own and to ensure that his clients are at all times
treated fairly.
g. Conflicts
of Interest
(i) taking all reasonable steps to avoid
conflicts of interest and where such conflicts cannot reasonably be avoided,
taking all reasonable steps to ensure that clients are at all times treated
fairly.
h. Compliance
(i)
complying with all regulatory and Exchange requirements applicable to
the conduct of his business so as to promote the best interests of the clients
and the integrity of the market; and
(ii)
having in place internal procedures dealing with customer complaints.
i. Confidentiality
and Professional Secrecy
(i)
complying with all regulatory and Exchange requirements as regards
professional secrecy and confidentiality of Exchange information.
Section II Practical Application of the Principles
2.1 Honesty
and Fairness
(a)
In the course of business, a Member must not
(i)
create, by any means and in any security, any fictitious order of
transaction either on his own or in collaboration with others;
(ii)
disclose or utilise, with a view to making a profit or to take any
other material advantage, any confidential information which he has obtained by
virtue of his business relationship either with listed companies or with
prospective listed companies where the Member is acting as a sponsoring
stockbroker;
(iii)
create a false market by bringing about a movement in the price of a
security using contrived factors such as collaboration between buyer and seller
calculated to create a movement of the price of the security not justified by
the assets, earnings or prospects related to that security;
(iv)
effect, directly or indirectly, a series of transactions in any
security on the Exchange creating actual or apparent active trading in such
security for the purpose of inducing the purchase or sale of such security by
others;
(v)
employ any device, scheme or artifice with the intention to mislead or
to defraud;
(vi)
engage in any act, practice or course of business which would operate
as a fraud or deceit on any person;
(vii)
make any untrue statement of a material fact or omit to state a
material fact either recklessly or with the intent to mislead; and
(viii)
solicit, accept, offer, or give any gift or inducement from or to a
client or prospective client which is likely to cause the recipient to treat
the giver favourably or unfairly with regard to third parties.
2.2 Diligence
(a)
A Member shall take all reasonable steps to execute at the earliest
opportunity, orders of clients in accordance with the instructions of such
clients.
(b)
A Member shall always execute orders of clients on the terms which are
the best available.
(c)
In dealings where a Member provides investment advice, a Member shall
make no recommendation to, nor enter into a transaction for, a client unless
such recommendation or transaction is appropriate and suitable for such client
having due regard to the facts disclosed by the client and other facts or
matters relating to the client which the Member is or should be aware of
through the exercise of due diligence.
2.3 Capabilities
(a)
A Member must ensure initially and on a continuing basis that any
person he appoints to deal with clients or other members, is fit and proper and
otherwise qualified, (either by having the relevant professional training or
through experience) to act for him in the capacity so appointed.
(b)
A Member must ensure initially and on a continuing basis that he has
adequate resources to monitor and enforce compliance with professional
standards of integrity and fair dealing by his employees and persons appointed
by him to deal with clients or other members.
(c)
A Member must ensure that he has, at all times, satisfactory internal
control procedures which can be reasonably expected to protect his clients,
other members and his operations from financial loss arising from theft, fraud,
or other dishonest acts, professional misconduct or omissions.
(d)
A Member must at all times possess the financial and operational
capabilities which would enable him to properly conduct his business.
2.4 Information About Clients
(a)
The principle set forth in Article 1.2 (d) represents a continuing
obligation imposed upon Members who should also, in this respect, comply with
the Prevention of Money Laundering Act, 1994, and the Guidelines which may be
issued by the Council from time to time.
(b)
In order to protect himself, fellow Members and the market, if a Member
cannot satisfy himself of the identity of a client, he must decline to act for
that person.
(c)
The Exchange may prescribe, from time to time, certain minimum
requirements in respect of the information Members are required to obtain from
existing or prospective clients. The requirements should at least include the
following details for each client :
(i)
full name and address;
(ii)
satisfactory evidence regarding the identity of the client by way of an
identity card, relevant sections of the passport, or any other official
document which uniquely identifies the client;
(iii)
written instructions from the client setting forth the terms and
conditions under which the Member will render services to the client; and
(iv)
sufficient details, obtained to the best of the Member’s ability, of
the financial position and investment experience and objectives of a client as
is relevant to the services to be provided by the Member.
2.5 Information
for Clients
(a)
A Member must provide
clients, on request, with adequate information about his Member firm including
his business address, any relevant conditions or restrictions under which the
Member conducts his business, and the identity and status of employees and
others acting on his behalf with whom the client may have contact prior to or
at the time of entering into a Client Agreement with a client but such
information need not be contained in the Client Agreement.
(b)
All agreements for services between a Member and a client must be in
writing and must set out in sufficient detail the basis upon which those
services are to be provided. Such an agreement, and any other communication,
must not remove or seek to remove, exclude or restrict any rights conferred on
clients or any liabilities of a Member to a client, under any Article contained
in the Act or the Bye-laws.
(c)
After a Member has carried out a transaction for a client, he must
promptly confirm with the client in writing the essential features of the
transaction including the date and time of the transaction, the name of the
securities involved, the price paid or received, the quantity purchased or sold
and any other fees or commissions payable.
(d)
Where a Member deals with or advises a client, he must fully disclose
all relevant facts, including details of the remuneration attributable to the
dealing or to the provision of advice.
(e)
Any agreement, communication, notification or information provided by a
Member to a client shall be presented fairly and clearly.
2.6 Client
Priority
(a)
A Member shall handle orders of clients fairly and in the order in
which they are received, and ensure that such client orders have in all cases
priority over orders for his own account.
2.7 Conflicts
of Interest
(a)
Where a Member has a material interest in a transaction to be carried
out on behalf of a client, or a relationship which gives rise to an actual or a
potential conflict of interest in relation to such transaction, he must neither
advise, nor deal, in relation to the transaction unless he has :
(i)
fairly disclosed that material interest to the client and received such
client’s consent in writing; and
(ii)
has taken all reasonable steps to ensure fair treatment of the client.
2.8
Compliance
(a)
A Member shall take all reasonable steps including the establishment
and maintenance of all necessary procedures, to ensure that his employees act
in conformity both with their own, as well as with the Member’s relevant
responsibilities under the applicable Statute and Bye-laws.
(b)
A Member shall put in place the necessary procedures to ensure that :
(i)
complaints from clients relating to his conduct or to his dealings on
behalf of clients, are handled in a timely and appropriate manner;
(ii)
prompt steps are taken to investigate and respond to or to remedy the
complaints; and
(iii)
where the complaint is not or cannot be remedied promptly, the client
is advised of any further steps which may be available to the client.
(c)
A Member shall take reasonable steps, including the establishment and
maintenance of procedures, to ensure that all relevant information about his
business is recorded and retained.
(d)
A Member shall at all times be responsible for the acts or omissions of
his employees and agents in respect to the conduct of his business.
2.9 Confidentiality
and Professional Secrecy
(a)
A Member (or his employees) who comes into possession of
price-sensitive information in exercising his profession or carrying out his
duties, where such information is not yet public and where it relates to a
company or to the market in its securities, or to any event of general interest
to the market, should refrain from carrying out, directly or indirectly, any
transaction in which such information is used, and should refrain from passing
on the information to another person, until the information becomes public.
(b)
Information entrusted to a Member or acquired by reason of his
profession, constitutes a professional secret even if the Member subsequently
ceases to exercise such profession.