Securities and Cyber Laws

Chapter 1
Introduction
Online Trading is a service offered on the internet for purchase and sale of shares and
securities. In the real world, you place orders on your stockbroker either verbally
(personally or telephonically) or in a written form (fax). In Online Trading, you will
access a stockbroker's website through your internet-enabled PC and place orders through
the broker's internet-based trading engine. These orders are routed to the Stock Exchange
without manual intervention and executed thereon in a matter of a few seconds.
Through online trading, the securities industry has, for the first time, paved the way for
the implementation of direct order placement directly into the broking firm's trading
system via the Internet. By circumventing the broker in the order entry stage, the price
setting power for trading has shifted from the brokers and traditional stock exchanges to
the individuals.
The advent of online trading is probably the final stage in the `disintermediation of the
trading environment,' ending the process which started with the abolition of the fixed
brokerage commissions in the mid-1970s. In three years, by the end of 1999 this trend is
growing rapidly through out the world. 1
Stock exchanges today have to rely increasingly on information technology to stay

competitive in delivering services. This is primarily because of newer trading channels
used for communicating and transacting like Internet and On-line security trading.The IT
department of National Stock Exchange (NSE) employs 150 IT professionals forming a
third of its total staff strength. The exchange has invested close to Rs.400 Crores in
computers, software and communication equipment. It is therefore recognized as one of
"Top IT User" organizations.
In line with global trends NSE is structured and operates much like an information
technology company. It has the largest VSAT network in this part of the world with a
huge and complex web of hardware and software. It has a detailed disaster recovery site
that mirrors all operating systems. The NSE has set up its own Internet Webster, which is
visited daily by four Lakh persons for securities and share.2
The modern stock exchange technology does not need the traditional type of brokers to
match investors' orders as they used to do on the physical-trading floor. The automated
Trading screens can match buy and sell orders without the intervention of brokers. Today
brokers are needed only for settlement responsibilities. NSE introduced a nation-wide
VSAT driven screen based trading system
Operations commenced in Mumbai and rapidly spread all over India. NSE today offers
investors trading facilities in over 280 cities and town through 4000 terminals. For the
first time NSE introduced in India screen based trading with automated matching.
1
www.openarticlesubmission.com
2
www.indianexpress.com
1
The system conceals the identity of the parties to an order or trade. This help better
functioning of the market as disclosures of identity would put most members at a
disadvantage. The trading system operates on price time priority. This means given the
same set or orders, the orders that come first receive priority in matching. When an order
does not find an immediate match in remains in the system and is displayed to the whole
market, till a fresh order comes in or the earlier order is modified or cancelled. The
market screens at any point of time give the members complete information on the total
order depth in a security, the high price, the low price, the last traded price and other
related information.3
Electronic commerce (E-Commerce or EC) is an emerging concept that describes the

process of buying and selling or exchanging of products, services, share, securities and
information via computer networks including the Internet. It is the use of the Internet and
the Web to transact business. Doing business online, typically via the Web. It is also
called “e-business” “e-tailing” “e-sharing” and "I-commerce." Although in most cases e-
commerce and e-business are synonymous, e-commerce implies that goods and services
can be purchased online, whereas e-business might be used as more of an umbrella term
for a total presence on the Web, which would naturally include e-commerce (shopping)
component. E-commerce may also refer to electronic data interchange (EDI), in which
one company's computer queries and transmits purchase orders to another company's
computer.
It is an umbrella term for the process by which a customer may perform banking
transactions electronically without visiting a brick-and-mortar institution. The following
terms all refer to one form or another of electronic banking: personal computer (PC)
banking, Internet banking, virtual banking, online banking, home banking, remote
electronic banking, and phone banking. PC banking and Internet or online banking are
the most frequently used designations. It should be noted, however, that the terms used to
describe the various types of electronic banking are often used interchangeably.
PC banking is a form of online banking that enables customers to execute bank

transactions from a PC via a modem. In most PC banking ventures, the bank offers the
customer a proprietary financial software program that allows the customer to perform
financial and securities transactions from his or her home computer. The customer then
dials into the bank with his or her modem, downloads data, and runs the programs that
are resident on the customer's computer. Currently, many banks offer PC banking
systems that allow customers to obtain account balances and credit card statements, pay
bills, status of securities and transfer funds between accounts. 4
But this time some problem occurs that the cyber theft are hack the system and done
many grievous offences so to protect the securities and money our legislation took
measures .SEBI also led down some guidelines .The discussion of “Securities and Cyber
Laws” not only securities or share or banking but also relates to cyber law.
3
economictimes.indiatimes.com
4
www.blonnet.com/iw/2000/08/27
2
Chapter 2
Definition
“Security” generally means an organizations occasionally need to raise cash (or capital)
in order to expand their business through, for example, buying new premises, building
new factories or acquiring other companies. The options open to such organizations for
raising the necessary capital include:
Borrowing cash from banks,
Selling a part of their existing business,
Selling part ownership in the company (issuing shares), and
Borrowing cash from investors (issuing bonds)
With both shares and bonds generically known as securities. The securities marketplace:
Facilitates the process of bring new securities to the marketplace, and
Provides a structured and regulated method of buying and selling existing securities for
the protection of the investors.
"Securities" means shares, debentures, bonds and other stock of any company or other
body corporate, whether incorporated in India or outside, and securities issued by any
local authority in India, or by the Government of, or a local authority in, any such country
outside India as may be approved by the Reserve Bank and includes Government security
as defined in section 2 of the Public Debt Act, 1944, (18 of 1944.) but does not include
mortgages on immovable property;5
‘Security’ means shares, stocks, bonds and debentures, Government securities as defined
in the Public Debt Act, 1944 (18 of 1944), savings certificates to which the Government
Savings Certificates Act, 1959 (46 of 1959) applies, deposit receipts in respect of
deposits of securities and units of the Unit Trust of India established under sub-section
(1) of section 3 of the Unit Trust of India Act, 1963 (52 of 1963) or of any mutual fund
and includes certificates of title to securities, but does not include bills of exchange or
promissory notes other than Government promissory notes or any other instruments
which may be notified by the Reserve Bank as security for the purposes of
Foreign Exchange Management Act 1999 .6
“Securities” include—
Shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities
of a like nature in or of any incorporated company or other body corporate;
[(ia) Derivative;
(ib) Units or any other instrument issued by any collective investment scheme to the
investors in such schemes;]7
“Government security” means a security created and issued, whether before or after the
commencement of this Act, by the Central Government or a State Government for the
purpose of raising a public loan and having one of the forms specified in clause (2) of
section 2 of the Public Debt Act, 1944 (13 of 1944);8
5
Unit Trust of India Act, 1963 Sec 2 (i)
6
Foreign Exchange Management Act 1999 Sec 2(za)
7
Securities Contracts (Regulation) Act, 1956 Sec 2 (h)
8
Securities Contracts (Regulation) Act, 1956. Sec 2 (b)
3
“Foreign security” means any security, in the form of shares, stocks, bonds, debentures
or any other instrument denominated or expressed in foreign currency and includes
securities expressed in foreign currency, but where redemption or any form of return such
as interest or dividends is payable in Indian currency .9
"Securitisation" means acquisition of financial assets by any securitisation company or
reconstruction company from any origin nator whether by raising of funds by such
securitisation company or reconstruction company from qualified institutional buyers by
issue of security receipts representing undivided interest in such financial assets or
otherwise.10
“Cyber Law” is a relevant knowledge for all of us living in a society with increasing use
of Computers and you will appreciate this as you proceed to read more of this book. The
Cyber Laws that we are discussing here is the “Fundamental Law” of the Cyber Space.
Whoever is living in this Cyber Space or is conducting business in Cyber Space or is
exposed to Crimes in Cyber Space and Crimes emanating from Cyber Space, should all
be concerned with this branch of Law.
In particular, Software professionals who actually create Cyber Space elements in the
form of software products that communicate in Cyber Space and live for most part of
their day in Cyber Space need to absorb many salient features of this Law so that they
keep themselves and their clients safe and protected from the consequences of Cyber
Law.
Corporate Executives who own and manage Cyber Space properties also need to be
conversant with Cyber Laws so that they will be able to discharge their functions
properly. With the passage of the Information Technology Act 2000, (ITA- 2000) with
effect from October 17, 2000 India has decisively moved from a paper Based society to a
paper less society.
As per the provisions of the ITA-2000, Records and Signatures in Electronic form will
have complete legal effect, validity or enforceability in all transactions except for the
following five types of transactions specifically excluded in the Act.
1.Negotiable Instruments (Other than Cheques)
2.Power of Attorney instruments,
3.Trust deeds,
4.Wills, and
5.Any contract of sale or conveyance of immovable property or interest in such property.
In bringing Digital Documents and Signatures within the ambit of law, ITA-2000 has
used a “Bridging Provision” to state that “Wherever Law” requires documents to be in
writing and to be “Signed”, the requirement will be deemed to have been satisfied if such
a document is rendered in electronic form and the signature is rendered in the manner
specified in the Act.
By virtue of this, every law in India today stands extended to Electronic Documents
excepting the categories mentioned in the earlier paragraph.11
9
Foreign Exchange Management Act, 1999 Sec 2(o)
10
Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.Sec
2(z)
11
Naavi Na.Vijayashankar Cyber Laws For Every Netizen in India (Version 2004) Page 13
4
What is cyber crime?
“Cyber” refers to imaginary space, which is created when the electronic devices
communicate, like network of computers.
Cyber crime refers to anything done in the cyber space with a criminal intent. These
could be either the criminal activities in the conventional sense or could be activities,
newly evolved with the growth of the new medium. Cyber crime includes acts such as
hacking, uploading obscene content on the Internet, sending obscene e-mails and hacking
into a person's e-banking account to withdraw money.12
Chapter 3
Transfer of securities through internet
“Security” generally means an organizations occasionally need to raise cash (or capital)
in order to expand their business through, for example, buying new premises, building
new factories or acquiring other companies. The options open to such organizations for
raising the necessary capital include:
Borrowing cash from banks,
Selling a part of their existing business,
Selling part ownership in the company (issuing shares), and
Borrowing cash from investors (issuing bonds)
With both shares and bonds generically known as securities. The securities marketplace:
Facilitates the process of bring new securities to the marketplace, and
Provides a structured and regulated method of buying and selling existing securities for
the protection of the investors.
This Securities may be transfer by following ways:

1. Prencipal
2 .Repurchase (repo)
3.Securities lending and borrowing
4.Treading book transfer
5.Depot(custodian)transfer 13
1. Principal Transaction
A principal transaction represents either a purchase or a sale by an security treading
organization(STO) on a proprietary trading basis(that is ,on its own behalf of a
client).A purchase of a security at one price followed by a sale at a higher price, with
each trade being effected STO “as principal” will reap a profit for the STO.
Characteristics Principal Transaction
12
www.naavi.org , www.cyberlawcollege.com (21.01.09)
13
Michael Simmons ,Securities operation , John Wiley & sons Ltd, Page 71
5
Securities only,
Securities + cash, cash only? Securities +Cash
Origin? Front office(trader or

market markers)
Trading position affected? Yes.
External Securities movement? Yes
External Cash movement Yes
Number of external counterparties? One
Issue a Trade confirmation? Yes.
Issue a settlement instruction Yes14
2. Repurchase (repo) Transaction

STO wishing to minimize the cost of borrowing cash may have arrangements with banks,
to borrow cash on a secure or unsecured basis; secured cash is cheaper to borrow than
unsecured cash as the lender has less risk. A repo is a form of secured cash borrowing
where the STO utilize the securities it has purchased and which it holds at the relevant
custodian to deliver to the cash lender as security for the cash that the STO is borrowing.
Characteristics Repurchase (repo) Transaction
Securities only,
Origin? Front office(Repo trader )
Trading position affected? No.
Issue a settlement instruction Yes(one for opening value

date, one for closing)15
3. Securities Lending and Borrowing Transaction

14
15
Securities operation ,Michael Simmons ,John Wiley & sons Ltd, Page 73
6
Any investor in securities ,including individuals, institutions and STOs,is able to increase
the return on their investment if they lend their securities STOs and other investors
borrow a lender’s securities ,for which the lender receives a fee agreed with the borrower.
Characteristics Securities Lending and Borrowing Transaction

Securities only,
Securities + cash, cash only? Securities only or
Securities +Cash
Origin? Front office

or back office
Issue a settlement instruction Yes(two for opening value

date, two for closing)16
4. Treading book transfer Transaction
STO’s traders an market marker trade on a principal basis with other STOs and
institutional clients within some STOs ,two (or more)trading books within the same legal
entity may be allowed to trade and hold trading possession in the same security
Characteristics Treading book transfer Transaction
Securities only,
Origin? Front office
Trading position affected? Yes (both seling and

buying books).
External Securities movement? No
External Cash movement No
Number of external counterparties? None

16
Securities operation ,Michael Simmons ,John Wiley & sons Ltd, Page 75
7
Issue a Trade confirmation? No.
Issue a settlement instruction No
5. Depot ( custodian ) Transfer Transactions
An individual STO typically appoints one custodian in each financial centre to settle
transactions and to hold the resultant securities on behalf of the STO.
Normally, an STO will hold secdurities in one custodian per financial centre, however
certain securities may be held at more than one custodian or financial centre.
Characteristics Depot ( custodian ) Transfer Transactions
Securities only,
Origin? Back office
Trading position affected? Yes(both selling and buying

.books)
External Securities movement? No
External Cash movement No
Number of external counterparties? None
Issue a Trade confirmation? No.
Issue a settlement instruction No17
To protect the transaction Securities and Exchange Board of India (SEBI) made some
rules & regulation .They are as discussed in the next chapter.
Chapter 4
17
8
Guideline of SEBI on Internet Based Trading and Services
Modernization of market infrastructure improves market transparency standard. The

improvement of market micro-structure increases trading efficiency. Risk containment
measures help in improving market integrity and safety. Rolling settlement enhances
liquidity and also provides for faster settlement. These have been the main focus of the
SEBI’s efforts in the secondary market. The SEBI extends its oversight to 23 stock
exchanges in the country and directs its efforts towards encouraging them to become
more effective and efficient self-regulatory organizations. The measures taken by the
SEBI in 1999-2000 in the secondary market are discussed below.
Depositories and paperless trading and other related issues

Dematerialisation of securities is one of the major steps for improving and modernizing
market and enhancing the level of investor protection through elimination of bad
deliveries and forgery of shares, and expediting the transfer of shares. Recognizing the
far reaching benefits that would accrue to the market through the removal of physical
securities, the speeding up of dematerialisation process has been high on the agenda of
the SEBI. During the year 1999-2000, the SEBI continued its policy to enhance the
growth of paperless trading and electronic book entry transfer but in a phased manner so
as to allow time for required infrastructure to develop and to gain acceptance of the
investors and the market. The following measures have been taken by the SEBI during
the year under review :
• The SEBI issued directive to the companies included in the list of securities for
dematerialisation to effect compulsory dematerialised trading for all investors and
institutional investors on the scheduled dates announced and to sign agreements and
complete all formalities with both the depositories and establish connectivity on time so
that dematerialisation could proceed on schedule.
• Companies whose shares are being traded compulsorily in dematerialised form by all
investors, are required to compulsorily provide for transfer and dematerialisation of
securities simultaneously. This will help the investors in reducing the time taken for
transfer of shares.
• The SEBI (Depositories and Participants) Regulation, 1996 was amended to include
registrars to an issue or share transfer agents in the eligible category to become a
depository participant.
• Introduction of procedures for interconnectivity between the various segments and
components involved in the process of dematerialisation and its smooth functioning at
various levels of participantion in dematerialised securities.
• In respect of the value of portfolio of securities of the beneficiary accounts, the broker
DPs allowed to maintain client assets in custody to the extent of 100 times of broker’s
networth from the earlier limit of 35 times upto a networth of Rs.750 lakhs and 50 times
above the networth of Rs. 750 lakh .
• The branch offices of DPs that are handling more than 5000 accounts shall either have
direct electronic connectivity with the depository or with office of depository participant
that is connected live to the depository. This would adequately equip the infrastructure of
9
the depository participant branches so that the reach of the DPs could be increased and
the branches could serve the investors better, while ensuring that the branches have
adequate control systems.
• Every company is required to appoint the same registrars and share transfer agents for
both the depositories.
• The registrars and share transfer agents are required to accept partial dematerialisation
requests and will not reject or send back the complete lot of dematerialisation request to
the DPs in cases where only a part of the request was to be rejected.
• A Standing Committee co-chaired by the Managing Directors of NSDL and CDSL was
formed which will meet at least once a month to resolve issues between DPs, registrars
and depositories which may arise from time to time. The other members of the committee
are SHCIL, HDFC Bank, Standard Chartered Bank, Integrated Enterprises (I) Ltd., Karvy
Consultants, ICICI Ltd. and three persons from RAIN.
• If a DP has sent information about dematerialisation electronically to a Registrar but
physical shares are not received, the registrar will accept the dematerialisation request
and carry out dematerialization on the indemnity given by the DP and proof of dispatch
of document given by DP.
• CDSL and NSDL shall be required to persuade major DPs to open branches in cities
where DP services are not available.
• The broker DPs who are also registered with SEBI as share transfer agents, shall be
allowed to change their broker DP status to that of share transfer agent/Registrar DP.
• The committee on dematerialisation of shares was also seized of various issues as
mentioned below :
• Standardization of various procedures related to trading in depository system:
• Safety features and standards for depository operations:
• Expansion of depository infrastructure and making the branch offices with 'live"
connectivity:
• Systemic tracking of delays at the hands of the depository participants, share
transfer/issuer companies and depositories:
• Adequacy/capability of the depository system and systemic changes necessary to cope
with the workload present as well as future:
• One stage processing for transfer and dematerialisation:
• Reductions in the size of batch processing from the present level of 1000 requests per
batch:
• Good/bad delivery norms to be made mandatory on the registrars.18
Chapter 5
18
www.sebi.gov.in (21.01.09)
10
SEBI to Set Rules for India internet Trading
Indian market regulator, the Securities and Exchange Board of India (SEBI)will create
stringent standards and practices for online trading, including disclaimers required to be
followed by the Internet sites relating to the capital market.
Indian market regulator, the Securities and Exchange Board of India (SEBI) will create
stringent standards and practices for online trading, including disclaimers required to be
followed by the Internet sites relating to the capital market.
The first meeting of the sub-group on surveillance and enforcement of Internet trading,
appointed by SEBI met Wednesday and discussed the need for further adaptation and
changes in the Internet environment.
"The need to effectively regulate financial advisory services on the Internet follows the
mushrooming activity of multiple services in terms of information and advice to investors
on the Net," said L.K. Singhvi, Senior Executive Director, SEBI. The sub-group will
define a framework and guidelines for investment advisory services offered over the Net.
"Most developed nations like the U.S., Australia, Hong Kong, Malaysia have such
guidelines in place for investment advisors on the Net. Besides, as per Section 11 (2B) of
the SEBI Act, we are empowered to regulate investor advisors," Singhvi said.
The group has also set up a sub-group to evolve a set of fair practices and obligations to
be followed by Web sites dealing with capital market related services.
To this end, members of the group will release a detailed paper suggesting standards for
content, community and commerce related activities.
In the area of surveillance and monitoring of activity on the Internet, the group has
recommended that there was a need to have appropriate infrastructure, systems and
technology support and modalities in this regard will be worked out by the group.
The Internet surveillance group also felt that there was a need to review some of the
existing regulations and by-laws of exchanges, which may have become redundant or
obsolete with advent and adoption of this technology.
The group felt that investor education in the Internet environment is critical for investor
protection and would be instrumental in making investors aware of the precautions
required to be taken while availing of Internet services.
"Some of the members of the group will look into areas that an investor on the Net needs
to know. Some of the by-laws and regulations may have become obsolete in the current
context. This group will identify and restructure any such inconsistent clauses," he
explained.
The group also considered the mushrooming activity of providing advisory services on
the Internet. Although the SEBI Act empowers SEBI to register investment advisors at
present, there is no regulation in this area.
11
The Group on Enforcement and Surveillance of Internet Trading was convened by L.K.
Singhvi and include amongst its members, Sunil Chandiramani, chief executive officer,
Ernst & Young, Kalpathi S. Suresh, chief executive officer SSI, Nimish Kampani,
Chairman, JM Financial and Investment, S. Ramadurai, chief executive officer of Tata
Consultancy Services, Dominic Price of J.P. Morgan, Albert Aboody of KPMG, Dhiren
Sheth, member BSE Board, Madhavi Puri Buch, chief executive officer of ICICI
Webtrade and officials of the Bombay Stock Exchange(BSE) and the National Stock
Exchange (NSE).
SEBI clears decks for use of WAP for Net trading (Mumbai 2nd August)
THE SEBI-promoted committee on Internet-based securities trading and services today

cleared the decks for usage of wireless application protocol (WAP) for Internet trading
and derivatives trading on the Internet.
The regulator's decision is expected to further extend the reach of the markets and
increase the number of investor volumes and liquidity.
“This is in keeping with the international trend and is the natural direction in which
markets will, over time, progress to,'' Mr. O.P. Gahrotra, Senior Executive Director,
SEBI, said.
The regulator will issue formal instructions to the stock exchanges in about a week's time
on the decisions taken today.
The regulator, however, maintained that Internet trading via WAP will be in adherence of
all the requirements stipulated earlier by SEBI for Internet-based trading and the
minimum security features laid down in this regard.
SEBI's decision will enable the WAP-enabled mobile device (mobile phones, personal
digital assistants, etc) users to trade in securities using their mobile sets.
The regulator said the same minimum systems and operational requirements laid down
earlier for Net-based trading, will be applicable for derivative trading on the Internet.
``Once derivatives trading gains ground, this will be a logical extension,'' Mr. Gahrotra
added.
The technical committee, at its meeting today, also deliberated on issues pertaining to
interfacing between brokers, depositories and banks.
It recommended adopting the messaging standards on the lines of the standards being
evolved by the RBI working group on Inter-Bank Messaging Standards.
Commenting on the decisions taken, Mr. Gahrotra said the regulator had not set a time
limit to how soon these measures need be implemented.
``One cannot say whether it will come into effect in the next one or three months' time.
What we are looking at is that in the long-term, the markets should not feel inhibited in
anyway. We will put the system in place, let the market provide the feedbac k,'' he
explained.
National long distance phone norms finalised (NEW DELHI, Aug. 2)
THE Telecom Commission on Wednesday finalised the terms and conditions for opening
up the national long distance (NLD) telephony to private firms, ending the monopoly of
the incumbent Department of Telecom Services (DTS). The commission is also learnt to
12
have decided that the corporate entity of DTS will be a registered company under the
Companies Act, 1956.
The Telecom Commission Chairman, Mr. Shyamal Ghosh, told presspersons after the
three-hour long meeting, that the commission had decided on several key entry-related
issues such as entry fee, licence fee as revenue share and inter-circle carriage. He, ho
wever, declined to give comments as the decision will be forwarded to the
Communication Minister for his comments.
“We have fixed entry fee at a very competitive level, in accordance with the provisions of
the National Telecom Policy, 1999,'' he said.
Mr. Ghosh said the DTS would not get a statutory status, but would have to be registered
as a company under the Companies Act. Agency reports stated that the decision of the
commission was mostly in line with the recommendations of the Telecom Regulatory
Authority of India (TRAI). The regulator had suggested an entry fee of Rs. 500 crores
with a non-refundable component of Rs. 1 00 crores. The balance Rs. 400 crores was
refundable on the basis of roll-out obligations.
TRAI's recommendation of fixing an annual licence fee in the form of revenue share of
10 per cent and universal service obligation (USO) were also considered and resolved by
the commission, the agency report stated.19
Chapter 6
Committee for promote an internet based trading

A committee on corporate governance set up by the SEBI under the chairmanship of Shri
Kumar Mangalam Birla, member SEBI Board with the objective of strengthening and
promoting the standard of corporate governance of listed companies, had made several
recommendations. Corporate governance is an important tool of investor protection. This
would be the first formal code of corporate governance in the country through the listing
agreement. It is expected that the introduction of these measures will raise the awareness
and make a good beginning for raising standard of functioning of corporate. The SEBI
board accepted the recommendations of the committee followed by a notification issued
to the concern agencies:
Major recommendations of Kumar Mangalam Birla Committee
• The board of directors of the company shall have an optimum combination of executive
and non-executive directors with not less than fifty percent of the board of directors
comprising of non-executive directors.
• All pecuniary relationship or transactions of the non-executive directors viz.-a-viz. the
company, should be disclosed in the Annual Report.
• Board meeting shall be held atleast four times a year with a minimum time gap of
atleast four months between any two meetings.
• The Committee recommended the constitution of Audit Committee in a listed company.
• The committee recommended that audit committee shall have minimum three members,
all being non-executive directors, with the majority of them being independent, and with
at least one director having financial and accounting knowledge, the chairman of the
committee shall be an independent director.
19
www.emastersindia.net
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• The audit committee shall meet at least thrice a year. One meeting shall be held before
finalization of annual accounts and one every six months. The audit committee shall have
powers which should include to investigate any activity within its terms of reference, to
seek information from any employee, to obtain outside legal or other professional advice,
to secure attendance of outsiders with relevant expertise, if it considers necessary.
• The committee will review with the management, the external and internal auditors, the
adequacy of internal control systems, the adequacy of internal audit function including
the structure of the internal audit department, staffing and seniority of the official heading
the department, reporting structure, discussion with internal auditors, reviewing the
findings of any internal investigations by the internal auditors, discussions with external
auditors.
• The audit committee will review the company’s financial and risk management policies
and will look into the reasons for substantial defaults in the payment to the depositors,
debenture holders, shareholders (in case of non payment of declared dividends) and
creditors.
• The committee has recommended that remuneration of directors including non-
executive directors will be decided by the board of directors.
• A director shall not be a member in more than 10 companies or act as chairman of more
than 5 companies in which he is a director. He will keep informed the company about the
committee positions he occupies in other companies.
• As part of the directors’ report or as an addition there to, a Management Discussion and
Analysis Report should form part of the annual report to the shareholders. The
management discussion and analysis will include industry structure and developments,
opportunities and threats, segment–wise or product-wise performance, outlook, risks and
concerns, internal control systems and their adequacy, discussion on financial
performance with respect to operational performance, material developments in human
resources / industrial relations front, including number of people employed.
• Disclosures must be made by the management to the board relating to all important
financial and commercial transactions.
• In case of the appointment of a new director or re-appointment of a director, the
shareholders must be provided with a brief resume of the director; nature of his expertise
in specific function areas ; and names of companies in which the proposed directors holds
directorship and the membership of committees of the board.
• Information like quarterly results and presentation made by companies to analysts, shall
be put on company’s web-site, or shall be sent in such a form so as to enable the stock
exchange on which the company is listed, to put it on its own web-site.
• A board committee under the chairmanship of a non-executive director shall be formed
to specifically look into the redressing of shareholders and investors’ complaints like
transfer of shares, non-receipt of balance sheet, non-receipt of declared dividends etc.
• To expedite the process of share transfers, the board of the company shall delegate the
power of share transfer to an officer or a committee or to the registrar and share transfer
agents.
• A company will have to include separate sections on corporate governance in its annual
report with details on compliance, non-compliance of any mandatory requirement. The
company will have to obtain a certificate from the auditors of the company regarding
compliance of conditions of corporate governance.
14
• Almost all the companies listed on stock exchanges or seeking listing for the first time
will have to complete all mandatory corporate governance requirements in a phased
manner by March 31, 2003. The companies seeking listing for the first time will have to
complete corporate governance at the time of listing.
Internet based securities trading

A Committee on internet based securities trading and services was set up by the SEBI to
develop regulatory parameters for use of internet in securities business and effective
enforcement of internet trading. The report of the Committee was approved by the Board.
The Board decided that internet trading can take place in India within the existing legal
framework through the use of order-routing systems, which will route orders from clients
to brokers, for trade execution on registered stock exchanges. The Board also took note of
the recommended minimum technical standards for ensuring safety and security of
transactions between clients and brokers which will be enforced by the respective stock
exchanges.
Committee on internet based securities trading and services - first

report
Internet, the new medium that has emerged as a result of convergence between
telecommunication and computers, is revolutionising the way business is done and is
making inroads into every conceivable area of business activity. The potential of e-
commerce is no longer a matter of debate. In fact, every forecast has been proved wrong,
with actual figures far exceeding the forecast. The natural extension of e-commerce in the
securities market is Internet based trading and securities services and it has made a great
impact on the securities trading business. Issuers of securities, intermediaries, service
providers and investors are increasingly selling and dealing or providing securities
services on the Internet.
SEBI as the Capital Market Regulator in India, has twin objectives i.e. of regulating as
well as developing the market. Although, the Internet based trading and securities
services are at a nascent stage in India, the pace of growth predicted brings in an urgency
to address legal and policy issues that are associated with it. To examine and clarify
regulatory and other issues related to Internet based securities trading and services on a
continuous basis, SEBI has constituted a standing committee on Internet Based Securities
Trading and Services, chaired by Shri O.P. Gahrotra, Sr.Executive Director, SEBI. As the
Internet technology continues to evolve, the standing committee will assess new
developments and address relevant issues from time to time. The committee comprises of
the following members:
Prof. Deepak B Phatak, IIT, Mumbai.
Shri A.K.Sharma, DG Investigations - Registrations
Dr D.P.S.Seth, Sr.DDG(CS), Department of Telecommunication
Dr. R. H. Patil, Managing Director, NSE
Shri Anand Rathi, President, BSE
Shri S. Ramadorai, CEO, Tata Consultancy Services,
Shri C N Ram, Vice President (IT), HDFC Bank,
Shri LK Singhvi, Sr. ED, SEBI
Ms. DN Raval, ED,SEBI
15
The Committee would also like to acknowledge the commendable efforts made by Shri
Deepak Sanchety, Shri Ananta Barua, Division Chief, SEBI and Ms. Prarthna Awasthi,
Shri Ankit Sharma, Ms. Maninder Cheema and Shri Ebrahim Machhiwala, officers of
SEBI. The Committee held its first meeting on 18th Aug 1999. The Committee took
stock of the developments in the use of Internet in securities business at the international
level and within the country. In its deliberations the committee noted that a number of
issuers and information service providers have developed websites and are providing
information to investors in India. Similarly, many brokers have developed websites and
have started offering value added information to their clients. A number of websites
provide price quotations from major stock exchanges, on almost real-time basis.
Technology development and related market innovation is growing at a fast pace. This
has in turn created an urgent need to address emerging legal and policy issues. If these
issues are not timely dealt with, it is bound to adversely affect the growth of the markets.
Committee also appreciated that physical infrastructure in terms of Internet service
providers, connectivity etc., no matter how extensive or robust, is not sufficient in the
long run to sustain the high growth witnessed in the capital market. It is equally
important, therefore to create soft infrastructure through harmonisation of laws, rules,
regulations, and policies. It is also necessary to clearly lay down the rights of investors
and the rights and responsibilities of all market participants and other agencies involved
in this exercise.
In India the policies related to telecommunication including connectivity between two
closed user groups and closed user group and Internet are governed by the Department of
Telecommunication (DoT), Government of India. Matters related to encryption of
messages are also handled by the DoT. The Government has been concerned about the
issue of connectivity and a lot of debate has been generated on these issues. Recently
DoT has come out with guidelines of connectivity of independent networks.
The Committee noted that Internet is already being used in developed securities markets
in the world. Some of the areas where its usage has become common have been described
below.
Internet Based Trading through Order Routing Systems
Internet based trading on conventional exchanges, uses the Internet as a medium for
communicating client orders to the exchanges, through broker web sites. Brokers’ web
sites may serve a variety of functions. These may include;
--allowing the clients to directly trade through internet;

--advertise the broker-dealers' services to potential investors;
--offer market information and investment tools similar to those offered by information
vendor or SRO web sites;
--offer real-time or delayed quote information, continuously update quotes while the user
visits other sites, or allow investors to create a personal stock ticker;
--provide market summaries and commentaries, analyst reports and trading strategies and
market data on currencies, mutual funds, options, market indices and news; and
--offer investors access to portfolio management tools and analytic programs;
--information on commissions and fees; and
--account information and research reports.
16
In an Order Routing System, a broker offering Internet trading facility provides an
electronic template for the customer to enter the name of the security, whether it is to be
bought or sold, the quantity and whether the order is a market or limit order.
Once the broker’s system receives this information, it is checked electronically against
the customer's account and is routed out by the broker to the appropriate exchange for
execution. After the order is executed, the customer receives a message confirming the
order. The customer's portfolio and ledger account may also be updated on-line to reflect
the transaction.
Use of Internet as Alternative Trading Systems (Provision for price discovery and
matching outside conventional exchanges)
In foreign jurisdictions, Alternative trading systems have been developing outside
conventional securities markets, which provide investors with additional proprietary
electronic trading facilities for securities that are traded principally on securities
exchanges, or other organised markets. They have price discovery functions, matching
systems and crossing systems. The systems that are currently in use in outside
jurisdictions are closed systems and are not accessible to the general public through the
Internet.
The securities markets regulators abroad have maintained flexible and open policies
designed to encourage innovation in the secondary securities markets. As a result, a
number of market participants, usually broker-dealers, have developed computerized
"alternative trading systems", by which the system centralise, display, match, cross or
otherwise execute trading interest.
Use of Internet for making Initial Public Offerings
Issuers of securities are using the Internet to communicate directly with their
shareholders, potential investors and analysts by disseminating corporate information. In
foreign jurisdictions, they are also using the Internet to communicate to the public for the
following:
--public offerings;
--private offerings; and
--disclosure and communication.
Issuers are using the Internet to market themselves to potential investors. The Internet is
also being used for fulfilling necessary disclosure requirements, for disseminating the
prospectus in electronic form and even for receiving share applications in public issues
electronically. In India, SEBI has taken initiative in permitting use of the network of
stock exchanges for collection of investor applications in public offerings by the issuer
companies.
Investment Advisory Services
Brokers as well as other service providers such as investment firms, research outfits etc.
are using the Internet for marketing and advertising purposes, for presenting information
on portfolio analysis and market information, and for communicating with and receiving
orders from potential investors. The services offered by the service providers to the
investors are generally the following:
--advertising;
--providing investment information and investment advice;
--underwriting;
--communicating with the investors;
17
--customer orders; and
--record keeping.
Working Groups set up by the Committee Considering the present state of capital
markets in India and keeping in view the ongoing developments in Internet based
securities business, it was felt that SEBI as a regulator could strive to identify areas where
use of Internet in the capital market is possible within the existing legal framework. One
such area identified by the Committee, which is also the central theme of this report is the
area of Internet trading on existing electronic exchanges. In this area, though early
introduction of Cyber Laws would be highly desirable but their existence is not a
necessary precondition.
To look into the existing regulatory scenario and to bring out some ground rules for use
of the medium of Internet, the Committee therefor constituted the following two working
groups to look into the areas of :
i. security protocols and standardisation of interfaces for Internet based securities trading,
chaired by Prof. Deepak B. Phatak, IIT, Powai, Mumbai
ii. surveillance and monitoring related issues arising due to Internet based securities
trading, chaired by Shri L K Singhvi, Sr. ED, SEBI
The Committee also requested Ms D N Raval, Executive Director, SEBI to examine the
legality of introduction of Internet trading and the issue of Alternative Trading Systems.
This report of the standing committee examines the regulatory and security requirements
regarding Internet Based Trading on Conventional Exchanges. Separate report(s) will
cover the other areas related to Internet applications in the securities markets.
The report of the first working group on security protocols and standardisation of
interfaces has since been submitted and incorporated in this report as Annexure I. The
committee would like to place on record its sincere thanks to Dr. D.B.Phatak, Ms.D.N.
Raval and their team members.
The global financial market is undergoing a transformation due to rapid technological
developments. It thus becomes imperative that for developing an effective regulatory
framework developments in other parts of the world should be studied and analysed.
With nearly two million on-line investors, Internet trading in the United States is growing
by leaps and bounds. Internet trading is being facilitated by large brokerage houses, thus
changing the total concept of securities trading.
A team comprising of members from stock exchanges and SEBI visited the United States
to study these developments and had interactions with brokerage houses, Internet service
providers and other agencies involved in facilitating Internet trading. The team also
discussed the developments in the emerging regulatory and supervisory framework in
United States with the Securities and Exchange Commission officials. They were also
apprised of the various initiatives taken by SEC in this regard. These inputs have been
utilised while drafting this report.
Regulatory Approach
The Committee has worked on the premise that the order screening and subsequent
execution which is being done manually today is simply sought to be replaced by
electronic screening and execution through the brokers terminal in the proposed system
of Internet trading, the basic principles of regulation would remain the same, irrespective
18
of the medium of communication or delivery. The Committee seeks to encourage the
legitimate use of Internet in a uniform regulatory environment for trading on the Internet
in the already existing conventional automated screen based trading models.
Further objective of the committee is to do the initial groundwork by laying down
standards which would help create an appropriate environment in which transition and
adoption of international standards in the regulation and communication technology
becomes easy at a future date.
Scope of the Report
As per the report at Annexure II, under the existing legal framework, Internet can be used
as an order routing system through registered stock brokers on behalf of clients for
execution of trades on recognised stock exchanges. At present, very few banks are
offering Internet based services. Depositories have not yet started offering services on
Internet. Because of this, interfacing securities trading with banking and depository
services may take longer.
Keeping this in view, as a first, the Committee has limited the scope of its present
recommendations to cover only those issues, which are directly related to Internet trading
through order routing systems.
Recommendations of the Committee

Application for Permission by Brokers
SEBI registered Stock Brokers interested in providing Internet based trading services will
be required to apply to the respective stock exchange for a formal permission. The stock
exchange should grant approval or reject the application as the case may be, and
communicate its decision to the member within 30 calendar days of the date of completed
application submitted to the exchange. The stock exchange, before giving permission to
brokers to start Internet based services shall ensure the fulfillment of the following
minimum conditions:
Networth Requirement
The broker must have a minimum net worth of Rs.50 lacs if the broker is providing the
Internet based facility on his own. However, if some brokers collectively approach a
service provider for providing the internet trading facility, net worth criteria as stipulated
by the stock exchange will apply. The net worth will be computed as per the SEBI
circular no FITTC/DC/CIR-1/98 dated June 16, 1998.
Operational and System Requirements
Operational Integrity: The Stock Exchange must ensure that the system used by the
broker has provision for security, reliability and confidentiality of data through use of
encryption technology. (Basic minimum security standards are enclosed in Annexure-I).
The Stock Exchange must also ensure that records maintained in electronic form by the
broker are not susceptible to manipulation.
System Capacity: The Stock Exchange must ensure that the brokers maintain adequate
backup systems and data storage capacity. The Stock Exchange must also ensure that the
brokers have adequate system capacity for handling data transfer, and arranged for
alternative means of communications in case of Internet link failure.
Qualified Personnel: The Stock Exchange must lay down the minimum qualification for
personnel to ensure that the broker has suitably qualified and adequate personnel to
19
handle communication including trading instructions as well as other back office work
which is likely to increase because of higher volumes.
Written Procedures: Stock Exchange must develop uniform written procedures to handle
contingency situations and for review of incoming and outgoing electronic
correspondence.
Signature Verification/ Authentication: It is desirable that participants use authentication
technologies. For this purpose it should be mandatory for participants to use certification
agencies as and when notified by Government /SEBI. They should also clearly specify
when manual signatures would be required.
Client Broker Relationship
Know Your Client: The Stock Exchange must ensure that brokers have sufficient,
verifiable information about clients, which would facilitate risk evaluation of clients.
Broker-Client Agreement: Brokers must enter into an agreement with clients spelling out
all obligations and rights. This agreement should also include inter alia, the minimum
service standards to be maintained by the broker for such services specified by
SEBI/Exchanges for the internet based trading from time to time.
Exchanges will prepare a model agreement for this purpose. The broker agreement with
clients should not have any clause that is less stringent/contrary to the conditions
stipulated in the model agreement.
Investor Information: The broker web site providing the internet based trading facility
should contain information meant for investor protection such as rules and regulations
affecting client broker relationship, arbitration rules, investor protection rules etc. The
broker web site providing the Internet based trading facility should also provide and
display prominently, hyper link to the web site/page on the web site of the relevant stock
exchange(s) displaying rules/ regulations/circulars. Ticker/quote/order book displayed on
the web-site of the broker should display the time stamp as well as the source of such
information against the given information.
Order/Trade Confirmation: Order/Trade confirmation should also be sent to the investor
through email at client’s discretion at the time period specified by the client in addition to
the other mode of display of such confirmations on real time basis on the broker web site.
The investor should be allowed to specify the time interval on the web site itself within
which he would like to receive this information through email. Facility for reconfirmation
of orders which are larger than that specified by the member’s risk management system
should be provided on the internet based system.
Handling Complaints by Investors: Exchanges should monitor complaints from investors
regarding service provided by brokers to ensure a minimum level of service. Exchange
should have separate cell specifically to handle Internet trading related complaints. It is
desirable that exchanges should also have facility for on-line registration of complaints
on their web-site.
Risk Management
Exchanges must ensure that brokers have a system-based control on the trading limits of
clients, and exposures taken by clients. Brokers must set pre-defined limits on the
exposure and turnover of each client. The broker systems should be capable of assessing
the risk of the client as soon as the order comes in. The client should be informed of
acceptance/rejection of the order within a reasonable period. In case system based control
20
rejects an order because of client having exceeded limits etc., the broker system may have
a review and release facility to allow the order to pass through. Reports on margin
requirements, payment and delivery obligations, etc. should be informed to the client
through the system.
Contract Notes
Contract notes must be issued to clients as per existing regulations, within 24 hours of the
trade execution.
Cross Trades
As a matter of abundant precaution, the committee seeks to reiterate that as in the case of
existing system, brokers using Internet based systems for routing client orders will also
not be allowed to cross trades of their clients with each other. All orders must be offered
to the market for matching.
It is emphasised that in addition to the requirements mentioned above, all existing
obligations of the broker as per current regulation will continue without changes.
Exchanges may also like to specify more stringent standards as they may deem fit for
allowing Internet based trading facilities to their brokers.
Enforcement
A separate working group has been set to look into the surveillance and enforcement
related issues arising due to Internet based securities trading. However, general anti-fraud
provisions (SEBI Fraudulent and Unfair Trade Practices Regulations, 1995) would apply
to all transactions involving securities or financial services, regardless of the medium.
Conclusion and Future Agenda
Under the existing legal and regulatory framework, SEBI registered brokers can offer
trading on Internet through order is routing systems. However, with the rapid
development of the technology, we have to evolve further steps in this direction It is there
for proposed that as the next step link between the depositories and banks shall be
established after the necessary regulations have been passed. This would reduce the
clearing and settlement time and would also minimise the risk of all the participants
involved in the transactions.
We have to look forward towards achieving an ideal scenario where all the services
related to securities markets including marketing of initial public offers on internet,
providing investment advisory services to the clients, broking, clearing and settlement
etc., are provided on the Internet by an intermediary. In a nutshell it can be said that
we are moving towards a one stop service centre.
Annexure I
Network Security Protocols and Interface Standards
At present the Indian laws are silent on the security of Internet information. However, the
draft E-Commerce Act focuses on this issue and prescribes the requirements like
electronic certification, digital signatures etc. which will play an important role on the
authenticity of such information gathered from the Internet. These requirements will also
have to be met by Internet traders using ORS on the stock exchanges.
Network Security
It is suggested that the following security measures should be made mandatory
i. User id
ii. First Level password (Private code)
21
iii. Automatic expiry of passwords at the end of a reasonable duration. Reinitialise access
on entering fresh passwords
iv. All transaction logs with proper audit facilities to be maintained in the system.
v. Secured Socket Level Security for server access through Internet
vi. Suitable Firewalls between trading set-up directly connected to an Exchange trading
system and the
Internet trading set-up.
Advanced Security products used for E-Commerce may be made optional. Some of these
are:
a. Microprocessor based SMART cards
b. Dynamic Password (Secure ID Tokens)
c. 64 bit/128 bit encryption **
d. Second Level password (personal information e.g. village name,birth date etc.)
**DOT policy and regulations will govern the level of encryption.

Standards for Web Interfaces and Protocols
For Order Routing Systems to become operational in the existing scenario, interfacing of
trading systems with Banking Systems and Depositories is not immediately required and
may be considered after the E-Commerce Laws are in place. Similarly the Group believes
that Wireless Internet Interface has the potential of a very large penetration and the Group
will work towards interface standardisation in that area as well. Between a Trading Web
Server and Trading Client Terminals, Interfaces Standards as per recommendations of
IETF (Internet Engineering Task Force) and W3C (World Wide Web Consortium) may
be adopted. E.g.: HTTP Ver 4 or above HTML Ver 4/XML.
Systems Operations
a. Brokers should follow the similar logic/priorities used by the Exchange to treat client
orders
b. Brokers should maintain all activities/ alerts log with audit trail facility
c. Broker Web Server should have internally generated unique numbering for all client
order/trades
d. Brokers should seek permission from the Exchange before commencement of Internet
trading facility after providing complete details of the features of implemented systems.
e. Brokers should make periodic reporting to the Exchange as specified by the Exchange.
The committee strongly recommends that 128 bit encryption should be allowed to be
freely used by the Department of Telecommunications, Government of India to ensure
safety, security and integrity as well as for maintaining investor trust in the internet based
trading system.20
Chapter 7
Transfer of cash through internet21
20
www.sebi.gov.in(21.01.09)
21
22
The following transaction types are typically used by Securities trading organization
involving cash :
1. repurchase(repo)
2. unsecured borrowing and lending
3. account transfer
4. foreign exchange
1. Repurchase (repo) Transaction
For completeness, repo transaction are listed here as a cash transaction type, as well as in
previous section as securities transaction type. Many ripo transactions are executed by
securities trading organizations from the perspective of the need to borrow cash, against
which securities are given as collateral.
The borrowing or lending of cash on a secured basis is very similar in structure to a repo
transaction and so will not be specifically described within this section .
2. Unsecured cash Borrowing and Lending
The settlement of principle purchase by an securities trading organization will result in a

debit of cash and usually a negative cash position on the securities trading organization’s
nostro account at the custodian. As the rate of overdraft interest chard by a custodian may
be out of line with market rates, a securities trading organization will reduce its costs if it
can borrow cash more cheaply from another source.
Characteristics Unsecured cash Borrowing and Lending
Securities + cash, cash only? Cash only
Origin? Treasury department
External cash movement? Yes
Issue a settlement instruction Yes(one for opening value ,one for closing)
3. Account Transfer Transactions
23
Where an STO has an overdraft (or anticipated overdraft) at a custodian as a result of
settlement of trades and the STO wishes to cover that overdraft, one of the options open
to the STO is to transfer cash (in the same currency) from:
• another account with the same custodian, or
• an account held at another Bank
Where the accounts involved belong to the STO.
Characteristics Account Transfer Transactions
Securities + cash, cash only? Cash only
Origin? Treasury department or

Or back office
Issue a settlement instruction Yes (both paying and

Receiving nostros)
4. Foreign Exchange Transactions
A further option for an STO to cover an over draft is to execute a foreign exchange(FX)
transaction. Where the STO has a credit balance in a nostro account in one currency.(e.g.
Japanese Yen), but has an over draft in anther currency (e.g. US Dollar). The STO can
effect an FX transaction that sells the appropriate amount of Yen in exchange for the
required amount of Dollars.
It is important to note that an FX transaction is not a temporary loan or borrowing of
cash, but an outright sale of one currency and purchase of another, at an agreed exchange
rate.
Characteristics Foreign Exchange Transactions
Securities + cash, cash only? Cash only (two currencies)
Origin? Back office or treasury

Department
24
Issue a settlement instruction Yes (both paying and

Receiving nostros)22
Chapter 8
Internet Banking in India – Guidelines23

(June 14, 2001)
Reserve Bank of India had set up a ‘Working Group on Internet Banking’ to examine
different aspects of Internet Banking (I-banking). The Group had focused on three major
areas of I-banking,
i.e.,
(1) technology and security issues,
(2) legal issues and
(3) regulatory and supervisory issues.
RBI has accepted the recommendations of the Group to be implemented in a phased
manner. Accordingly, the following guidelines are issued for implementation by banks.
Banks are also advised that they may be guided by the original report, for a detailed
guidance on different issues.
I. Technology and Security Standards:
a. Banks should designate a network and database administrator with clearly defined
roles as indicated in the Group’s report.
b. Banks should have a security policy duly approved by the Board of Directors. There
should be a segregation of duty of Security Officer / Group dealing exclusively with
information systems security and Information Technology Division which actually
implements the computer systems. Further, Information Systems Auditor will audit the
information systems.
c. Banks should introduce logical access controls to data, systems, application software,
utilities, telecommunication lines, libraries, system software, etc. Logical access control
techniques may include user-ids, passwords, smart cards or other biometric technologies.
d. At the minimum, banks should use the proxy server type of firewall so that there is no
direct connection between the Internet and the bank’s system. It facilitates a high level of
control and in-depth monitoring using logging and auditing tools. For sensitive systems, a
stateful inspection firewall is recommended which thoroughly inspects all packets of
22
Michael Simmons, Securities operation , John Wiley & sons Ltd, Page 80-84
23
Naavi Na.Vijayashankar Cyber Laws For Every Netizen in India
25
information, and past and present transactions are compared. These generally include a
real time security alert.
e. All the systems supporting dial up services through modem on the same LAN as the
application server should be isolated to prevent intrusions into the network as this may
bypass the proxy server.
f. PKI (Public Key Infrastructure) is the most favoured technology for secure Internet
banking services.
However, as it is not yet commonly available, banks should use the following alternative
system during the transition, until the PKI is put in place:
1. Usage of SSL (Secured Socket Layer), which ensures server authentication and use of
client side certificates issued by the banks themselves using a Certificate Server.
2. The use of at least 128-bit SSL for securing browser to web server communications
and, in addition, encryption of sensitive data like passwords in transit within the
enterprise itself.
g. It is also recommended that all unnecessary services on the application server such as
FTP (File Transfer Protocol), telnet should be disabled. The application server should be
isolated from the e-mail server.
h. All computer accesses, including messages received, should be logged. Security

violations (suspected or attempted) should be reported and follow up action taken should
be kept in mind while framing future policy. Banks should acquire tools for monitoring
systems and the networks against intrusions and attacks. These tools should be used
regularly to avoid security breaches. The banks should review their security infrastructure
and security policies regularly and optimize them in the light of their own experiences
and changing technologies. They should educate their security personnel and also the end
users on a continuous basis.
i. The information security officer and the information system auditor should undertake
periodic penetration tests of the system, which should include:
1. Attempting to guess passwords using password-cracking tools.
2. Search for back door traps in the programs.
3. Attempt to overload the system using DDoS (Distributed Denial of Service) &
DoS(Denial of Service) attacks.
4. Check if commonly known holes in the software, especially the browser and the email
software exist.
5. The penetration testing may also be carried out by engaging outside experts (often
called ‘Ethical Hackers’).
26
j. Physical access controls should be strictly enforced. Physical security should cover all
the information systems and sites where they are housed, both against internal and
external threats.
k. Banks should have proper infrastructure and schedules for backing up data. The
backed-up data should be periodically tested to ensure recovery without loss of
transactions in a time frame as given out in the bank’s security policy. Business
continuity should be ensured by setting up disaster recovery sites. These facilities should
also be tested periodically.
l. All applications of banks should have proper record keeping facilities for legal
purposes. It may be necessary to keep all received and sent messages both in encrypted
and decrypted form.
m. Security infrastructure should be properly tested before using the systems and
applications for normal operations. Banks should upgrade the systems by installing
patches released by developers to remove bugs and loopholes, and upgrade to newer
versions which give better security and control.
II. Legal Issues

a. Considering the legal position prevalent, there is an obligation on the part of banks not
only to establish the identity but also to make enquiries about integrity and reputation of
the prospective customer.
Therefore, even though request for opening account can be accepted over Internet,
accounts should be opened only after proper introduction and physical verification of the
identity of the customer.
b. From a legal perspective, security procedure adopted by banks for authenticating users
needs to be recognized by law as a substitute for signature. In India, the Information
Technology Act, 2000, in Section 3(2) provides for a particular technology (viz., the
asymmetric crypto system and hash
function) as a means of authenticating electronic record. Any other method used by banks
for authentication should be recognized as a source of legal risk.
c. Under the present regime there is an obligation on banks to maintain secrecy and
confidentiality of customer’s accounts. In the Internet banking scenario, the risk of banks
not meeting the above obligation is high on account of several factors. Despite all
reasonable precautions, banks may be exposed to enhanced risk of liability to customers
on account of breach of secrecy, denial of service etc., because of hacking/ other
technological failures. The banks should, therefore, institute adequate risk control
measures to manage such risks.
d. In Internet banking scenario there is very little scope for the banks to act on stop-
payment instructions from the customers. Hence, banks should clearly notify to the
customers the timeframe and the circumstances in which any stop-payment instructions
could be accepted.
27
e. The Consumer Protection Act, 1986 defines the rights of consumers in India and is
applicable to
banking services as well. Currently, the rights and liabilities of customers availing of
Internet banking services are being determined by bilateral agreements between the banks
and customers. Considering the banking practice and rights enjoyed by customers in
traditional banking, banks’ liability to the customers on account of unauthorized transfer
through hacking, denial of service on account of technological failure etc. needs to be
assessed and banks providing Internet banking should insure themselves against such
risks.
III. Regulatory and Supervisory Issues:

As recommended by the Group, the existing regulatory framework over banks will be
extended to Internet banking also. In this regard, it is advised that:
1. Only such banks which are licensed and supervised in India and have a physical
presence in India will be permitted to offer Internet banking products to residents of
India. Thus, both banks and virtual banks incorporated outside the country and having no
physical presence in India will not, for the present, be permitted to offer Internet banking
services to Indian residents.
2. The products should be restricted to account holders only and should not be offered in
other jurisdictions.
3. The services should only include local currency products.
4. The ‘in-out’ scenario where customers in cross border jurisdictions are offered banking
services by Indian banks (or branches of foreign banks in India) and the ‘out-in’ scenario
where Indian residents are offered banking services by banks operating in cross389
border jurisdictions are generally not permitted and this approach will apply to Internet
banking also. The existing exceptions for limited purposes under FEMA i.e. where
resident Indians have been permitted to continue to maintain their accounts with overseas
banks etc., will, however, be permitted.
5. Overseas branches of Indian banks will be permitted to offer Internet banking services
to their overseas customers subject to their satisfying, in addition to the host supervisor,
the home supervisor. Given the regulatory approach as above, banks are advised to
follow the following instructions:
a. All banks, who propose to offer transactional services on the Internet should obtain
prior approval from RBI. Bank’s application for such permission should indicate its
business plan, analysis of cost and benefit, operational arrangements like technology
adopted, business partners, third party service providers and systems and control
procedures the bank proposes to adopt for managing risks. The bank should also submit a
security policy covering recommendations made in this circular and a certificate from an
independent auditor that the minimum requirements prescribed have been met. After the
28
initial approval the banks will be obliged to inform RBI any material changes in the
services /products offered by them.
b. Banks will report to RBI every breach or failure of security systems and procedure and
the latter, at its discretion, may decide to commission special audit / inspection of such
banks.
c. The guidelines issued by RBI on ‘Risks and Controls in Computers and

Telecommunications’ vide circular DBS.CO.ITC.BC. 10/ 31.09.001/ 97-98 dated 4th
February 1998 will equally apply to Internet banking. The RBI as supervisor will cover
the entire risks associated with electronic banking as a part of its regular inspections of
banks.
d. Banks should develop outsourcing guidelines to manage risks arising out of third party
service
providers, such as, disruption in service, defective services and personnel of service
providers gaining intimate knowledge of banks’ systems and miss utilizing the same, etc.,
effectively.
e. With the increasing popularity of e-commerce, it has become necessary to set up ‘Inter-
bank Payment Gateways’ for settlement of such transactions. The protocol for
transactions between the customer, the bank and the portal and the framework for setting
up of payment gateways as recommended by the Group should be adopted.
f. Only institutions who are members of the cheque clearing system in the country will be
permitted to participate in Inter-bank payment gateways for Internet payment. Each
gateway must nominate a bank as the clearing bank to settle all transactions. Payments
effected using credit cards, payments arising out of cross border e-commerce transactions
and all intra-bank payments (i.e., transactions involving only one bank) should be
excluded for settlement through an inter-bank payment gateway.)
g. Inter-bank payment gateways must have capabilities for both net and gross settlement.
All settlement should be intra-day and as far as possible, in real time.
h. Connectivity between the gateway and the computer system of the member bank
should be achieved using a leased line network (not through Internet) with appropriate
data encryption standard. All transactions must be authenticated. Once, the regulatory
framework is in place, the transactions should be digitally certified by any licensed
certifying agency. SSL / 128 bit encryption must be used as minimum level of security.
Reserve Bank may get the security of the entire infrastructure both at the payment
gateway’s end and the participating institutions’ end certified prior to making the facility
available for customers use.
i. Bilateral contracts between the payee and payee’s bank, the participating banks and
service provider and the banks themselves will form the legal basis for such transactions.
29
The rights and obligations of each party must be clearly defined and should be valid in a
court of law.
j. Banks must make mandatory disclosures of risks, responsibilities and liabilities of the
customers in doing business through Internet through a disclosure template. The banks
should also provide their latest published financial results over the net.
k. Hyperlinks from banks’ websites, often raise the issue of reputational risk. Such links
should not mislead the customers into believing that banks sponsor any particular product
or any business24
Chapter 9
Legal issues in cyber banking 25
Banking was one of the earliest industries in the world to have adopted Internet into its
Business Model. Initially, the dot-com banks made significant progress in USA and
elsewhere in the world just as Amazon.com made its presence felt as a virtual book seller.
Gradually the Brick and Mortar Banks joined the race and today they use Internet as a
means of communication not only for Customer transactions but also for Inter-branch
transactions and Inter-bank transactions. In India, the strict licensing regime in the
Banking industry has ensured that no Virtual bank could come up on the Net.
However, the Commercial Banks entered the Cyber space initially with an information
website and later with limited online transactions. Today, without doubt ICICI Bank is
the leading Indian Bank on the Net with HDFC Bank, UTI Bank, SBI and others trying to
catch up with them.
The Competitive environment in which Commercial bankers have to function today in
India has also placed a premium on
o Reduction in Cost of Service
o Innovation in Products
o Better Customer Service.
Technology Banking in the Internet era will therefore try to achieve these objectives by
the use of Internet. The legal issues confronting the Cyber Banks of India have to
beanalyzed with reference to the general legal regime prevailing in India and the specific
guidelines that have now been issued by
Reserve bank of India in this regard.
Building blocks of technology banking
Technology Banking in the Internet era will be characterized by
1. Establishing customer relationship on the Internet and maintaining them through
Internet for a true “Any where, Any Time” Banking service.
2. Interacting with the existing clients through Internet for communication.
24
Naavi Na.Vijayashankar, Cyber Laws For Every Netizen in India (Version 2004), Page 371
25
Naavi Na.Vijayashankar Cyber Laws For Every Netizen in India
30
3. Using Internet for structuring and delivering services that require automatic real time
responses such as the Foreign Exchange and Treasury Operations besides the Stock
Market Payment mechanisms.
4. Inter Bank Fund Transfer and Clearing of cheques through Internet.
Legal issues
Digital Signatures:
The Banker Customer relationship in the Internet era will revolve around the Digital
signatures as it now revolves round written signatures. In view of the Digital Signature
being a creation of
Technology, The Banker would be heavily dependent on technology for
"Authentication", "Storage" and "Recovery" of information.
Customer Relation Establishment:
In the Meta society Banking, opening of accounts are always done with the Customer and
the Introducer being present before an authorized Bank officer. With the passage of the
Information
Technology Act, a natural question that will come up is whether an Account can be
opened through Electronic Documents only. For records sake, the RBI guidelines on
Internet Banking released
on June 14, 2001 has indicated that Banks should open accounts only after physical
verification of signatures. This implies that the guideline is over ruling the spirit of
Section 4 and 5 of the
Information Technology Act 2000 according to which an electronic application made
with a digital signature covered by the Digital Certificate from an approved Certifying
authority should be a legally valid application for starting a Banker-Customer Contractual
relationship. .
The action can be legally justified only by extending the provisions of Section 9 of the
ITA-2000 to RBI . However Section 9 was meant to provide a discretion to the
Government and some of the Government agencies not to adopt EGovernance measures
enunciated in sections 6, 7 and 8. It is doubtful if the legislative intent was to exempt RBI
from these provisions.
Presently, RBI is has become a Certifying Authority itself through its technology
arm IDRBT (Institute of Development and Research in Banking Technology). RBI also
has initiated amendments to Negotiable Instruments Act 1881 and the ITA- 2000 itself to
provide recognition to electronic form of cheques. It is time therefore for RBI to review
its Internet Banking guideline and withdraw the ban on opening new accounts through
digitally signed application forms.
Rights of Lien and Setoff:

Banking law and practice have developed some exclusive laws applicable to Bankers
particularly in the areas of Lien and Set off. While "Lien" refers to physical property,
"Set off" refers to
moneys due. In the Internet banking era, the “Virtual Properties” and “Virtual Balances”
come to the forefront. The established Banking law and practice will have to therefore
modify itself to accept lien of a virtual property and set off on virtual money.
Negotiable Instruments and the ITA-2000:
31
Law and Practice of Indian Banking have been developed on the basis of English law and
are fairly well established. The Negotiable Instruments such as the Cheque, Bill of
Exchange and the Promissory Note have a legal history of their own. With the advent of
Internet into Banking, many of these need to undergo a change.
When Information Technology Act-2000 was originally passed, it stated in its first
section itself that the Act shall not apply to a Negotiable Instruments. Now this restriction
has been confined to Negotiable Instruments other than a Cheque meaning the
Promissory Note and the Bill of Exchange. The Negotiable Instruments Amendment Act
2002 (NIAA-2002) has introduced two types of Electronic Instruments called the
Electronic Cheque and the Truncated Cheque and ITA-2000 would be applicable for such
cheques. Promissory Notes and Bills of Exchange are however outside the scope of the
ITA-2000.
The Electronic Cheque has been defined under NIAA 2002 as under:
"a cheque in the electronic form" means a cheque which contains the exact mirror
image of a paper cheque, and is generated, written and signed in a secure system ensuring
the minimum safety standards with the use of digital signature (with or without
biometrics signature) and asymmetric cryptosystem; Similarly, the truncated cheque has
been defined as under: "a truncated cheque" means a cheque which is truncated during
the course of a clearing cycle, either by the clearing house or by the bank whether paying
or receiving payment, immediately on generation of an electronic image for transmission,
substituting the further physical movement of the cheque in writing.
RBI is presently working on the procedures involved in operating the truncated cheque
and e-cheques. It is however clear that the truncated cheque being a system internal to the
Banking system, it is possible to install necessary equipments and truncate the physical
cheques. However, the concept of Electronic cheques to be used by the public is more
difficult to implement since it requires a hardware device for the purpose of converting a
physical cheque to a cheque in Electronic form. Even though this is an attempt to
introduce an electronic cheque in the Indian system, the suggested system is incomplete
without appropriate systems for endorsement and delivery of E-Cheques. In the
meantime, if a Customer issues a digitally signed instruction to his Banker containing all
the ingredients of a cheque such as an unconditional order to pay a certain sum of money
to a certain person, it is legally inconceivable not to recognize the nature of this
instruction as an E-Cheque.
While the Banker is at liberty to bar such instructions by specific contract, if the Banker
Customer Relationship is based on a contract, which is silent on this aspect, the
instruction cannot be ignored. If the instruction is refused and consequently the
beneficiary is forced to a financial loss or damage, which in turn results in a loss to the
customer, the Bank may have to compensate.
It may be recalled that even in Meta society Banking, a letter written by a customer
ordering the bank to make a certain amount of money to a certain person to the debit of
the customer’s account is always honoured.
Even though Clearing houses do accept some letter like instruments such as IT refund
orders, and Traveller’s cheques, customer’s letters are not an accepted instrument for
clearing purpose. But for this short coming, the letter is still binding on the Banker to
32
whom it is issued. Hence a similar electronic instruction cannot be ignored by the
Bankers.
Digital signature cannot tally with a specimen
When it comes to “Signature”, Banks adopt a ”Procedure” where by the signature should
be as per the specimen already supplied to the Bank. One important aspect of Digital
Signature is that it is irretrievably linked to the document and no two digital signatures
ever tally. It will require a totally different out look for the Bankers to accept a payment
instruction where the “Digital Signature is not tallied with any specimen already supplied
by the customer. Further, the Digital Signature even though may be as safe as the written
signature, relies on a Certifying authority for authentication. It would therefore make the
Banker subordinate to the Certifying Authority as regards authenticating a signature.
Termination of Banker Customer Relationship:
Bankers may receive e-mails notifying “Death”, “Insolvency” or “Insanity” of the
customer which, like the stop payment instructions would put them in a dilemma. The
dilemma is basically on the need to identify and authenticate the message. As in the usual
case of such information being received over phone or through third party unconfirmed
sources, the Bank Manager has to use his discretion in acting on such messages.
E-Mail Identifiers for Bank Staff:
In the context of receiving notices that affect banker-Customer relations, it becomes
relevant to discuss the effect of e-mail addresses such as manager@xyzbank.com or
ashok@Indianbank.com. If a third party is sending a mail at manager@xyz.com, it may
be considered a valid notice to the Bank while the personal name at the bank’s address
may be considered as a personal message. Banks will have to carefully develop their
policies of providing e-mail identities to their authorized staff.
Banking in a Continuous Time Cycle:
Another important aspect of Banking in the Internet era would be that one single Internet
Interface center would be able to cater to customers in different time zones. Hence the
Internet Bank is a 24-hour Bank. The Bank has to therefore consciously introduce a day
change over so as to give effect to policy changes. Unlike in Meta Society Banking where
the Banker and Customer are in the same time zone, in the Internet Banking zone, if the
rate of interest is to be changed, one has to be specific that the change is effective with
effect from X hours IST. Every Banking transaction has to be therefore time stamped and
the time becomes an important parameter of the voucher.
Security in Banking Environment:
So far when we spoke of security in the Banking environment, we spoke of “Physical
Security”. In the Internet era, Security has to be seen not only at the Physical level, but
also at the “Data Storage Level”. Apart from having a security guard at the door, it will
therefore be necessary to have a “Fire Wall” protecting the data.
Just as we distribute “Key” s to the safe at present, the Banking in the Internet era would
consist of “Passwords” as keys or “Smart Cards” as Key holders. Hacking and Virus will
be the tools of fraud more than “Forgery” and “Dacoity”. The Banker in the coming era
should prepare himself to deal with these technological threats to remain in business. A
detailed guideline on security has been issued by RBI which has been separately
reproduced at the end of this chapter. It is interesting to note that the guidelines suggests
the Banks to use the services of “Ethical Hackers” to monitor the security levels of the
network.
33
Real Time Information Products:
Another feature of Internet is its ability to collate information from many sources on a
real-time basis. This aspect of Internet would come in handy for Bankers in structuring
products in areas such as “Foreign Exchange” or “Treasury ”. For example, every foreign
exchange bid can be reverse auctioned on the Internet for obtaining best market rates
directly from the customers with counter offers. The Banker in this case will only act as a
trusted intermediary to enforce the contracts.
Once the exchange control regulations remove the concept of an “Authorized Dealer” and
permit direct customer level contacts, a normal E-Commerce portal such as
paisepower.com can substitute the Bank in brokering foreign exchange transactions.
Bankers have to be on their toes as otherwise the prediction of Mr A.T. Pannerselvam,
former IBA chairman that “Future of Indian Banking will belong to Non Bankers” will
come true.
Virtual Property As Security:
Bankers will increasingly come across requests to evaluate and accept Properties such as
web sites as security for loans. At present Banks conveniently avoid such decisions by
refusing the security and insisting on “Land and Building”. However, in the coming days,
wealth will concentrate with people who accumulate Intellectual Property and Virtual
Property and business from such customers will shift to those progressive bankers who
are capable of accepting these properties as security.
AMENDMENTS TO BANKER'S BOOKS EVIDENCE ACT AND RBI ACT
Realizing the growing importance of electronic documentation in Banking, the ITA-2000,
has proposed some vital amendments to the Bankers Books Evidence Act 1891 as well as
the RBI Act
1934 According to Schedule 3 (Ref: Sec 93) of the ITA-2000, Banks can now store
"Ledgers", "Day Books", "Cash Books", "Account Books" etc in the form of floppy,
Disk, Tape or other electromagnetic data storage devices. "Certified Copy" of
transactions include print outs of data stored in a floppy, disc, tape or any other
electromagnetic data storage device together with a statement certified as under:
-a certificate to the effect that it is a printout of such entry or a copy of such printout by
the principal accountant orbranch manager; and
-a certificate by a person in-charge of computer system containing a brief description of
the computer system and the particulars of the safeguards adopted by the system to
ensure that data is
entered or any other operation performed only by authorized persons the safeguards
adopted to prevent and detect unauthorized change of data; the manner in which data is
transferred from the system to removable media like floppies, discs, tapes or other
electromagnetic data storage devices
the mode of verification in order ensure that data has been accurately transferred to such
removable media; the mode of identification of such data storage devices the
arrangements for the storage and custody of such storage devices; the safeguards to
prevent and detect any tampering with the system; and any other factor which will vouch
for the integrity and accuracy of the system.
- a further certificate from the person in-charge of the computer system to the effect that
to the best of his knowledge and belief that the computer system operated properly at the
material time, he was provided with all the relevant data and the printout in question
34
represents correctly, or is appropriately derived from, the relevant data The amendment to
the RBI Act as per Schedule 4( Ref Section 94) empowers RBI to extend its powers
regarding regulation of Fund Transfers between Banks to "Electronic Means of Fund
Transfers" also. Cama Committee on E-Money.In one of the
recent attempts to exercise its control on E-Commerce, a working group constituted by
RBI on E-Money has come up with suggestions on electronic systems that can be used as
multipurpose e-money. The Working group headed by Mr Zarir J Cama which submitted
its report on July 11, 2002 has expressed its opinion that the Electronic Payment Systems
have the potential to become an independent medium of exchange and therefore needs to
be regulated. Accordingly the group has recommended that -e-money for multipurpose
use can be issued only when the payment has been made by the e-money holder in full
through Central Bank Money.
-Issue of e-money against credit is recommended to be restricted to Banks.
-Only single purpose e-money is recommended for use by other entities.
It also suggests that where e-money is issued in exchange of any other kind of services, a
"Redemption Option" should be provided for conversion into Central Bank Money.
These recommendations may shortly be codified into appropriate legislations. There will
however be many more areas of operation in Banking where the traditional legal
interpretations will have to be redefined to suit the requirements of Technology Banking
in the Internet Era.
Chapter 10
Conclusions
Recent incidents involving data loss have forced many organizations to consider how
they can significantly improve their data security. In particular, safeguarding personal
and financial data is a key responsibility for the financial services industry. The
mismanagement of data security is a significant risk for financial organizations due to the
nature of their business as they generally hold large volumes of personal and financial
data about their customers, such as names, addresses, dates of birth, bank account details,
transaction records, PIN, national insurance numbers and so on. Thus, the financial
services industry needs to pay close attention to how they handle this type of data.
Financial organizations are becoming more aware of the potential costs of losing data.
However, corporate information security policies, procedures and controls are not enough
to prevent data loss through lack of employee awareness about the risks related to
handling information.26
Effective training and awareness mechanisms are crucial in these organisations as the
risks to which they are exposed, for instance identity theft, money laundering, market
abuse may all result in considerable inconvenience and possible financial loss to the
victims as well as damage to the organization itself.
26
Information security awareness in financial organizations November 2008.
35
Many bank and STOs already started some awareness programs for the protection of their
customer. As to protect cyber theft and related offences. Moreover the legislation also
took some measures as to protect the securities and cash from the hand of hackers. The
Information Technology Act, 2000 (IT Act).implemented to control the cyber securities .
Now a days I hope that the only to stop this short of offence by way of sound awareness
of the people who are engage in the sector of investments and share.
36

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Securities and Cyber Laws

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Chapter 1

Stock exchanges today have to rely increasingly on information technology to stay

Electronic commerce (E-Commerce or EC) is an emerging concept that describes the

PC banking is a form of online banking that enables customers to execute bank

Transfer of securities through internet

This Securities may be transfer by following ways:

Characteristics Principal Transaction

Origin? Front office(trader or

External Securities movement? Yes

External Cash movement Yes

Number of external counterparties? One

Issue a Trade confirmation? Yes.

Issue a settlement instruction Yes14

2. Repurchase (repo) Transaction

Origin? Front office(Repo trader )

Trading position affected? No.

External Securities movement? Yes

External Cash movement Yes

Number of external counterparties? One

Issue a Trade confirmation? Yes.

Issue a settlement instruction Yes(one for opening value

3. Securities Lending and Borrowing Transaction

Characteristics Securities Lending and Borrowing Transaction

Origin? Front office

Trading position affected? No.

External Securities movement? Yes

External Cash movement Yes

Number of external counterparties? One

Issue a Trade confirmation? Yes.

Issue a settlement instruction Yes(two for opening value

Characteristics Treading book transfer Transaction

Origin? Front office

Trading position affected? Yes (both seling and

External Securities movement? No

External Cash movement No

Number of external counterparties? None

Issue a settlement instruction No

5. Depot ( custodian ) Transfer Transactions

Characteristics Depot ( custodian ) Transfer Transactions

Origin? Back office

Trading position affected? Yes(both selling and buying

External Securities movement? No

External Cash movement No

Number of external counterparties? None

Issue a Trade confirmation? No.

Issue a settlement instruction No17

Modernization of market infrastructure improves market transparency standard. The

Depositories and paperless trading and other related issues

THE SEBI-promoted committee on Internet-based securities trading and services today

National long distance phone norms finalised (NEW DELHI, Aug. 2)

Committee for promote an internet based trading

Internet based securities trading

Committee on internet based securities trading and services - first

--allowing the clients to directly trade through internet;

Recommendations of the Committee

**DOT policy and regulations will govern the level of encryption.

Transfer of cash through internet21

1. Repurchase (repo) Transaction

2. Unsecured cash Borrowing and Lending

The settlement of principle purchase by an securities trading organization will result in a

Characteristics Unsecured cash Borrowing and Lending

Securities + cash, cash only? Cash only