PEERLESS SECURITIES LIMITED

RISK MANAGEMENT POLICY

Peerless Securities
Securities Limited
Regd. Office: 1, Chowringhee Square, 2nd Floor, Kolkata – 700069
Phone: +91 33 22435942, Fax: +91 33 22436941
Visit us at: peerlesssec.co.in email: info@peerlesssec.co.in
SEBI REGN NO: NSE : INB/INF 230821137, BSE : INB 010821131, NSDL : IN-DP-NSDL-96-99,CDSL : IN-DP-CDSL-505-2009
MB : INM000011799, PMS : INP000002767, Mutual Fund ARN-2103, MAPIN ID : 100002790, DPID : IN300985
CIN: U67120WB1995PLC067616
BACKGROUND:

SEBI has issued comprehensive guidelines governing issue of shares and other financial instruments, and has
laid down detailed norms for Stock Exchanges, Stock Brokers and other intermediaries in the secondary
market.

As Share Broking firm and Depository Participant, PSL has to consider the risk management issues on two
fronts viz. meeting the requirements of the Regulators / Stock Exchanges on risk containment issues and
setting its own operational guidelines with proper parameters to combat various risk related issues like
regulatory risks, market risks, client risks, employee risks etc. In the following pages we discuss the above
issues in two parts, viz. (i) risks containment measures as set in by the regulators/stock exchanges and (ii) our
own risk containment measures.

Major parameters of RMS Policy are mentioned below

Overall Risk management System

PSL have margin based automated RMS system. Total deposits of the clients are uploaded in the system and
client may take exposure on the basis of margin applicable for respective security as per VAR based margining
system of the stock exchange.

Risk Management Measures of PSL in Cash Segment:

It is, therefore, clear that all stock broker must have systems and procedures to ensure the above concerns of
SEBI. In PSL we have taken care of the above concerns as under.

i) Trading is allowed only against available margin in client’s account. For this purpose, margin should
be actually available at the time of entering trade in the cash segment of NSE / BSE either in the
form of credit balance in the trading account and/or approved securities held in Client’s margin
account.

ii) Shares held in margin account , those customers who have executed Power of Attorney in our
favour, the value of shares held in their Demat Accounts and trust account (shares on hold pending
receipt of cheques from clients) are subjected to suitable hair-cuts and such hair-cuts are reviewed
from time to time depending on the market condition. In a turbulent and chaotic market condition
hair-cuts are appropriately raised and in stable market conditions comparatively low hair-cut

Peerless Securities
Securities Limited
Regd. Office: 1, Chowringhee Square, 2nd Floor, Kolkata – 700069
Phone: +91 33 22435942, Fax: +91 33 22436941
Visit us at: peerlesssec.co.in email: info@peerlesssec.co.in
SEBI REGN NO: NSE : INB/INF 230821137, BSE : INB 010821131, NSDL : IN-DP-NSDL-96-99,CDSL : IN-DP-CDSL-505-2009
MB : INM000011799, PMS : INP000002767, Mutual Fund ARN-2103, MAPIN ID : 100002790, DPID : IN300985
CIN: U67120WB1995PLC067616
 percentages are maintained. At present hair-cut for shares are at VAR rate as disclosed by the
Exchanges at the previous day end. :

iii) We are giving exposure limit (buying & selling) at 7* times or var rate which ever is lower of
effective margin to the client during the day. Within the exposure limit, a client can do intra-day
trading a number of times, the aggregate volume being operational controlled by an overall
turnover limit. For example, if client margin is Rs.5000.00 and he intends to purchase a stock having
var of 20% . Gross Exposure limit is Rs.35000.00 (Rs. 5000 X 7 ) or 25000(5000x100/20) which ever
is lower i.e. Rs. 25000/- , a client may be allowed to do aggregate intra-day 50 times of his margin
i.e. Rs.250000.00 (The overall operational limit of Rs. 5,00,000/-) but at any point of time during
the day total exposure would not exceed his Gross Exposure limit of Rs.25000.00.

[* time quotient is subject to review and change from time to time]

iv) Effective margin is computed as under:

Client Ledger (Cheque updated up to 5 p.m. of the previous day) + securities given as margin
deposit with appropriate haircut + hold back securities kept in trust account with appropriate hair
cut +value of securities hole in POA enabled Demat account with appropriate hair cut + open
purchase position after appropriate hair cut –open sale position add appropriate haircut

Margin exemption on early pay-in of securities:

In cases where early pay-in of securities is made up to 3 p.m. on a day, such positions for which early pay-in of
securities is made shall be exempt from margins.

v) Buying exposure is not allowed without being backed by adequate margin but selling is allowed to any
extent if the client wishes to sell from his holdings in Demat account. In case, Sell from Outside DP , the
specific request are required to sell exposure

vii) Risk Management Section perform a real time monitoring on the inter and intra day position of the client
through ODIN screen.

viii) A client’s position across all segments and stock exchanges is considered by Risk Management Section
while controlling the exposure of the client.

ix) If deals are not squared off same day by the client, branches /authorized person/subbroker (herein after
refer to as branch) have to collect cheque from the concerned clients covering the relative debit raised in the
Peerless Securities
Securities Limited
Regd. Office: 1, Chowringhee Square, 2nd Floor, Kolkata – 700069
Phone: +91 33 22435942, Fax: +91 33 22436941
Visit us at: peerlesssec.co.in email: info@peerlesssec.co.in
SEBI REGN NO: NSE : INB/INF 230821137, BSE : INB 010821131, NSDL : IN-DP-NSDL-96-99,CDSL : IN-DP-CDSL-505-2009
MB : INM000011799, PMS : INP000002767, Mutual Fund ARN-2103, MAPIN ID : 100002790, DPID : IN300985
CIN: U67120WB1995PLC067616
client account (purchase price + brokerage + security transaction tax) on T+1 day. If cheque is not forthcoming,
Branch should pursue with the client for payment through cheque as early as possible. In any case, if debit is
not adjusted by client either by paying through cheque or by sale of securities, branches have to square off
the debit on T+3rd day.

x) On-going scanning of MTM loss of securities bought and not paid by the client as yet is done through
suitable software and suitable action for recovery of dues through closing out the position is considered in
consultation with the branches concerned in case of drastic fall of available cushion below 15%*. In the event
of client's failure to increase cushion and the market conditions remain turbulent, the position is squared off
instead of waiting till the final day set for squaring off.

([* percentage (%) quotient is subject to review and change from time to time]

xi) It is to be ensured that client’s ledger is periodically settled as per Exchanges Regulations

There should be a minimum balance of Rs.500/- in the client account at the time of settlement which will be
paid to the client at the time of closure of account or when the account becomes inoperative for no further
transactions for a period of one year.

xii) Running auto-square off module:

All intra-day positions are to be extinguished by running the auto-square off module at 3.10 p.m. The process
will not take more than a few minutes to complete. Once the software is run, it will not be possible to place
any fresh intraday orders and all pending orders will get automatically canceled.

xiii) No trades will be allowed in physical scrips

xiv) Preferred Clients:

PSL shall have the prerogative to allow differential purchase limits and sell limits varying from client to client,
depending upon credit worthiness, integrity and past conduct of each client.

xv) Setting user limits:

This is done in a manner so that a definite barrier is created against execution of any unduly large value orders
on the trading terminal, either intentionally or inadvertently and at the same there are no operational hurdles
for genuine orders to put through.

Peerless Securities
Securities Limited
Regd. Office: 1, Chowringhee Square, 2nd Floor, Kolkata – 700069
Phone: +91 33 22435942, Fax: +91 33 22436941
Visit us at: peerlesssec.co.in email: info@peerlesssec.co.in
SEBI REGN NO: NSE : INB/INF 230821137, BSE : INB 010821131, NSDL : IN-DP-NSDL-96-99,CDSL : IN-DP-CDSL-505-2009
MB : INM000011799, PMS : INP000002767, Mutual Fund ARN-2103, MAPIN ID : 100002790, DPID : IN300985
CIN: U67120WB1995PLC067616
The user limits currently in vogue are as under:

ODIN User limit: Value of deposit Rs.50 lakhs per terminal for
branches
Value of deposit Rs.20 lakhs per terminal for Sub-brokers

PGFI limit : Rs.25 lakhs

Order limit : Max. 10000 no. of shares and Rs. 10 lakhs per client both branches and sub-brokers

Turnover limit : Rs.50 lakhs

(Exception in respect of only order limit and turnover limit in the light of long history of high volume of trading
by some clients, may be allowed on the basis of requests of Branch Managers and duly approved by MD/WTD
or the senior executive authorized by MD/WTD in writing.)

xvi) Funds pay-in from clients:

On receipt of cheque from the client for meeting settlement obligations or margin deposits, the details of
the cheque are entered by the branch in specially designed software alongwith scan copy of the cheque

Simultaneously, the branch make entry of the cheque in back office (SharePro) software. Based on the above
information Risk Management validate the entry in SharePro package and credit is then reflected in the
client’s trading account. The client(s) who are chosen by making payment through net banking / direct
payment by ‘atom’ procedure , the credit is given after checking proper audit trial . In case of prefunded
instrument, like DD the client specific instruction alongwith reason for the same is to be provided.

As regards dishonour of cheques, the client-wise position is reviewed on an on-going basis

xvii) Funds payout to clients:

Cheques or payment advice in case of ECS (herein after cheque) are issued to the clients against their specific
requests after verifying their settlement and margin obligations. On receipt of Cheque Requisition Request
from the branch or clients through portal , position in client account and settlement and margin obligations
are verified by risk management desk who forward the matter to Finance & Accounts Section for issue of
cheques.

Peerless Securities
Securities Limited
Regd. Office: 1, Chowringhee Square, 2nd Floor, Kolkata – 700069
Phone: +91 33 22435942, Fax: +91 33 22436941
Visit us at: peerlesssec.co.in email: info@peerlesssec.co.in
SEBI REGN NO: NSE : INB/INF 230821137, BSE : INB 010821131, NSDL : IN-DP-NSDL-96-99,CDSL : IN-DP-CDSL-505-2009
MB : INM000011799, PMS : INP000002767, Mutual Fund ARN-2103, MAPIN ID : 100002790, DPID : IN300985
CIN: U67120WB1995PLC067616
Accordingly the Client overall exposure is reduced by that amount. This apart, cheques are issued when
settlement of clients position is carried out in conformity with SEBI/Exchanges instructions.

xviii) Putting in place a system restricting trade in banned securities in F&O segment and Trade for Trade
securities in Cash segment as advised by NSE .

xxi) PSL’s Risk measurement measures in Derivative Segment (Equity & Currency)

As in the case of capital market the default risk of stock broker is essentially controlled by NSE through upfront
collection of Initial Margin and on-going collection of Mark to Market Loss (SPAN Margin).

A) Collection of Margin:

The margin is collected in cash or permitted securities.

Cash:

Initially the clients have to deposit the initial margin by cheque.

Approved Securities:

Only approved securities notified by the stock exchanges and circularized by us are accepted from the clients
from their demat account with us and/or approved demat accounts maintained with other depository
participants.

Valuation

The valuation of approved securities is done on a daily basis at the latest available closing price. The valuation
is reduced by a haircut at the rate of SPAN. Only the value net of margins is considered as deposit.

The hair-cut rate if reviewed from time to time and depending on the market condition change is effected in
hair-cut percentage.

Peerless Securities
Securities Limited
Regd. Office: 1, Chowringhee Square, 2nd Floor, Kolkata – 700069
Phone: +91 33 22435942, Fax: +91 33 22436941
Visit us at: peerlesssec.co.in email: info@peerlesssec.co.in
SEBI REGN NO: NSE : INB/INF 230821137, BSE : INB 010821131, NSDL : IN-DP-NSDL-96-99,CDSL : IN-DP-CDSL-505-2009
MB : INM000011799, PMS : INP000002767, Mutual Fund ARN-2103, MAPIN ID : 100002790, DPID : IN300985
CIN: U67120WB1995PLC067616
B) Derivative Exposure limits

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

C) Recovery of MTM Loss:

MTM loss as advised by IF&SL, the clearing bank., is recovered from clients on T+1 day on the basis of Margin
Short Collection Report. On the client’s failure to put in additional margin to make good the MTM loss, it is
imperative that the relative F&O position is squared off before margin short collection positions are uploaded
to NSE.

To obviate high incidence of margin shortfall, it would be prudent to limit client’s future exposure strictly as
par with the initial margin collected and the client’s ability to meet MTM loss quickly.

D) Squaring off F&O positions for margin shortfall :

There should be morning intimation from RMS to Branches intimating the names of the clients whose
positions are to be exited. Normally a time limit up to 1.30 p.m. can be given for the purpose so that clients
can transfer surplus margin from Cash Segment to F&O Segment to augment margin or tender cheque
/securities covering the shortfall amount.

If MTM reaches 80% of the deposit RMS selling can be done even before above stipulates days.
In case of panic market conditions, RMS selling will be done on T+1 , even T basis.

E) Refusal of order for illiquid contracts:

In case of F & O segment, all the far Month Option contracts and third Month Option Contract (Except Nifty)
will not have buy and sell limit due to its illiquid nature, However in all above cases if client still wish to trade
then the client needs to coordinate with the respective branch and the limit will be set by Head Office after
analyzing the requirement.

Peerless Securities
Securities Limited
Regd. Office: 1, Chowringhee Square, 2nd Floor, Kolkata – 700069
Phone: +91 33 22435942, Fax: +91 33 22436941
Visit us at: peerlesssec.co.in email: info@peerlesssec.co.in
SEBI REGN NO: NSE : INB/INF 230821137, BSE : INB 010821131, NSDL : IN-DP-NSDL-96-99,CDSL : IN-DP-CDSL-505-2009
MB : INM000011799, PMS : INP000002767, Mutual Fund ARN-2103, MAPIN ID : 100002790, DPID : IN300985
CIN: U67120WB1995PLC067616
Other risk related issues

Stock Brokers are subjected to monitory penalties / strictures for committing any violations of the rules and
regulations, notifications, guidelines, instructions etc., issued by SEBI or the Central Govt. or the Exchanges.
Each Stock Broker, therefore, carries certain risks in the area of compliance. There are myriad numbers of
instructions which a Stock Broker should meticulously comply every day. Important issues which on violation
attract strict penalty are indicated below:

• Non-preservation of all records for 5 years. Certain records are required to be retained for 8 years to
meet the requirement under Anti Money Laundering Act.

• Failure to comply strict adherence to KYC norms at the time of opening of Demat and Trading Account
of clients.

• Failure to exercise proper due diligence for verification of all client details regarding bank accounts
details, in-person verifications, proper execution of member constituent agreement, issue of risk
disclosure document etc.

• Failure to issue of statement of accounts for funds and for securities to the clients.

• Failure to take redressal measures on customer grievances on being directed by SEBI or the Exchanges
within the stipulated time period.

• Doing business for defaulting clients.

• Failure to exercise proper watch in newly opened account leading to suspicious transactions not having
any bearing on the financial status of the client.

At PSL we have put in suitable measures to maintain high standard of work procedure so that the
relative guidelines are strictly complied with by the operative staff. With majority of the functions
being centralized at Head Office, there is constant monitoring of the quality of working. The quality of
compliance by our branches is also supervised through periodical inspection of the branches. Remedial
measures are initiated immediately on detection of shortcomings.

On opening of Demat / Trading Account the client should be issued a suitable letter from Head Office
drawing his / her attention to the client’s rights and obligations and the need to discharge such

Peerless Securities
Securities Limited
Regd. Office: 1, Chowringhee Square, 2nd Floor, Kolkata – 700069
Phone: +91 33 22435942, Fax: +91 33 22436941
Visit us at: peerlesssec.co.in email: info@peerlesssec.co.in
SEBI REGN NO: NSE : INB/INF 230821137, BSE : INB 010821131, NSDL : IN-DP-NSDL-96-99,CDSL : IN-DP-CDSL-505-2009
MB : INM000011799, PMS : INP000002767, Mutual Fund ARN-2103, MAPIN ID : 100002790, DPID : IN300985
CIN: U67120WB1995PLC067616
 obligations on being intimated by PSL. Such letters will be mailed by Head Office direct to the client’s
recorded address.

The system of checking by Internal Auditor has to be strengthened in regard to verifying that at all
levels (branches as well as Head Office) there is due diligence in opening of accounts, complying with
KYC requirements, in ensuring with systems safety in complying with the client instructions, manner of
uploading client instructions, verifying client signatures and in maintaining client records etc.

Contract notes are to be generated digitally and e-mailed to client within the stipulated 24 hours.

5. Communication
Client can view details of his ledger, margin, shortfall etc through his secured login on PSL website. The client
has to be aware about his position, outstanding balance and Risk. PSL is under no legal obligation to send any
separate communication but as a customer centric company

we may take extra efforts generally to ensure that client is well informed about the Risk and the possible
actions, which may follow. The communication would generally be through SMS / Email on registered contact
details with PSL

EMPLOYEE RISKS

The ambit of share broking activity is no longer confined to metro and big cities. With the coming up of
plethora of share broking firms operating from all corners of the country including district towns, there is a
constant pressure on acquisition of employees for running the show. Job hopping has become order of the day
and under such a scenario, employee loyalty can hardly be taken for granted. Thus we have to face risks on
employee front mainly on account of poor quality, impulsive behaviour and dishonesty manifested in
employee-client nexus. Keeping the above factors in mind, PSL: have put in the following measures to
safeguard against willful wrong behaviour of employees:

i) As far as possible while recruiting new employees, discreet enquiry is made with the previous
employers about the antecedents of the prospective employees.
ii) It has been made mandatory for all employees to avail at least 11days leave in a year.

iii) Meetings are held regularly at Head Office with group of employees like Branch Managers / Dealers
to educate them on various aspects of their job responsibility and the danger in flouting the laid
down instructions.
iv) Any dubious/unauthorized transactions done by any employee or any attempt made to bend rules
are to be reported by other employees at the branch to Head Office promptly.

Peerless Securities
Securities Limited
Regd. Office: 1, Chowringhee Square, 2nd Floor, Kolkata – 700069
Phone: +91 33 22435942, Fax: +91 33 22436941
Visit us at: peerlesssec.co.in email: info@peerlesssec.co.in
SEBI REGN NO: NSE : INB/INF 230821137, BSE : INB 010821131, NSDL : IN-DP-NSDL-96-99,CDSL : IN-DP-CDSL-505-2009
MB : INM000011799, PMS : INP000002767, Mutual Fund ARN-2103, MAPIN ID : 100002790, DPID : IN300985
CIN: U67120WB1995PLC067616
Further we are about to introduce certain other important measures which will have considerable effect on
our efforts to reduce employee risk as well as increasing customer satisfaction. These measures are:

i) Centralizing entire contract notes related work including dispatch of notes direct to clients at Head
Office.
ii) Sending SMS to clients direct reporting the transactions made by him during the day.

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

Peerless Securities
Securities Limited
Regd. Office: 1, Chowringhee Square, 2nd Floor, Kolkata – 700069
Phone: +91 33 22435942, Fax: +91 33 22436941
Visit us at: peerlesssec.co.in email: info@peerlesssec.co.in
SEBI REGN NO: NSE : INB/INF 230821137, BSE : INB 010821131, NSDL : IN-DP-NSDL-96-99,CDSL : IN-DP-CDSL-505-2009
MB : INM000011799, PMS : INP000002767, Mutual Fund ARN-2103, MAPIN ID : 100002790, DPID : IN300985
CIN: U67120WB1995PLC067616