Dos and Don’ts

IPOs/FPOs/Rights Issues
Secondary Market
Dealing with Brokers & Sub-brokers
Mutual Funds
Buyback of Securities
Open Offers (under Takeover Regulations)
Collective Investment Schemes

IPOs/FPOs/Rights Issues

Read the Prospectus/ Abridged Prospectus and pay special attention to:
  Risk factors
  Outstanding litigations and defaults, if any
  Financials of the issuer
  Object of the issue
  Company history
  Background of the promoters
  Instructions for making an application.
In case of any doubts/problems, contact the compliance officer named in the offer document.

In case you do not receive, within due period, the physical certificates/ credit to demat account or refund of application money,  lodge a complaint with the compliance officer of the issuer company and with the post-issue lead manager listed in the offer document.

Don’t fall prey to market rumours.
Don’t go by any implicit/explicit promise made by the issuer or any one else.

Don’t invest based on the prevailing bull run of the market index or of scrips of other companies in the same industry or scrip of the issuer company/group companies.

Don’t bank upon the price of the shares of the issuer company to necessarily go up.

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Secondary Market

Transact only through SEBI-recognised stock exchanges.
Deal only through SEBI-registered intermediaries.

Complete all required formalities for opening an account with the broker (Client registration, Client agreement forms etc).

Ask for and sign the “Know Your Client” Agreement.

Read and properly understand the risks associated with investing in securities before undertaking any transactions.

Assess the risk-return profile of the investment as well as the liquidity and safety aspects before making your investment decision.

Ask all relevant questions and clear your doubts with your broker before transacting.

Invest based on sound reasoning and fundamentals of the company after taking into account all publicly available information.

Give clear and unambiguous instructions to your broker/sub-broker/ depository participant.
Insist on a contract note for each of your transactions and verify all details in contract note, immediately on receipt. If in doubt, crosscheck details of your trade with details as available on the exchange website.
Scrutinize minutely both the transaction and the holding statements that you receive from your Depository Participant.
Keep copies of all investment documentation.
Handle Delivery Instruction Slips (DIS) Book issued by DPs carefully. Insist that the DIS numbers are pre-printed and your account number (Client ID) is pre stamped.
In case you are not transacting frequently, make use of the freezing facility provided for your demat account.
Pay the required margins in the prescribed time.
Deliver the shares/depository slip in case of sale and pay the money in case of purchase within the prescribed time.
Participate and vote in general meetings either personally or through proxy.
Don’t undertake off-market transactions in securities.
Don’t deal with unregistered intermediaries.
Don’t fall prey to promises of unrealistic returns.
Don’t invest on the basis of hearsays and rumors.
Don’t forget to take account of the potential risks that are involved in the investment.

Don’t be influenced into buying into fundamentally unsound companies (penny stocks) based on sudden spurts in trading volumes or prices or favourable articles/stories in the media.

Don’t follow the herd or play on momentum.
Don’t be misled by hot tips.
Don’t try to time the market.
Don’t hesitate to approach the proper authorities for redressal of your doubts/grievances.
Don’t leave signed blank Delivery Instruction Slips of your demat account lying around.
Don’t sign blank Delivery Instruction Slips(DIS) and keep them with the Depository Participant (DP) or with the broker to save efforts when required.

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Go through all rules, regulations, bye-laws and disclosures made by the exchanges.
Trade only through the Trading Members (TM) registered with SEBI or through an authorised person of the TM registered with the exchange.
While dealing with an authorised person, ensure that the contract note has been issued by the TM of the authorized person only.
While dealing with an authorized person, pay the brokerage/ payments/ margins etc. to the TM only.
Ensure that for every executed trade you receive duly signed contract note from your TM highlighting the details of the trade along with your unique Client ID.
Obtain receipt for collateral deposited with the TM towards margin.
Go through the details of Client-Trading Member Agreement.
Know your rights and duties vis-à-vis those of the TM/ Clearing Member.
Be aware of the risks associated with your positions in the market and margin calls on them.
Collect/pay mark-to-market margins on your futures position on a daily basis from / to your TM.
Don’t start trading in derivatives unless you have understood the Risk Disclosure Documents
Don’t trade on any product without knowing the risk and rewards associated with it

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DealingDealing with Brokers & Sub-brokers

Deal only with SEBI-registered brokers/sub-brokers.
Ensure that the broker/sub-broker has a valid SEBI registration certificate.
Ensure that the broker/sub-broker is permitted to transact in the market.
State clearly to the broker/sub-broker who will be placing orders on your behalf
Insist on client registration form to be signed by the broker/sub-broker before commencing operations.
Enter into an agreement with your broker/sub-broker setting out the terms and conditions clearly.
Insist on contract note/ confirmation memo for trades done each day
Insist on bill for every settlement.

Ensure that broker’s name, trade time and number, transaction price and brokerage are shown distinctly on the contract note.

Insist on periodical statement of accounts.
Issue cheques/drafts in trade name of the broker only.
Ensure receipt of payment/ deliveries within 48 hours of payout

In case of disputes, file written complaint to the broker/sub-broker, to the stock exchange of which he is a member and to SEBI within a reasonable time.

In case of sub-broker disputes, inform the main broker about the dispute within a maximum of 6 months.

Familiarise yourself with the rules, regulations and circulars issued by the stock exchanges/SEBI before carrying out any transactions.


Don’t deal with unregistered broker/sub-broker

Don’t pay more than the approved brokerage to the intermediary.

Don’t undertake deals on behalf of others.

Don’t neglect to set out in writing orders for higher value given earlier over the phone.

Don’t sign blank delivery instruction slip(s) while meeting security pay-in obligation

Don’t accept unsigned/duplicate contract note/confirmation memo

Don’t accept contract note/confirmation memo signed by any unauthorised person.

Don’t delay payment/deliveries of securities to the broker/ sub-broker.

Don’t get carried away by luring advertisements

Don’t be led by market rumours or get into shady transactions

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Mutual Funds


Read the offer document carefully before investing.

Note that investments in mutual funds may be risky, and do not necessarily result in gains.

Mention your bank account number in the application form.

Invest in a scheme depending upon your investment objective and risk appetite.

Note that Net Asset Value ( NAV) of a scheme is subject to changes depending upon market conditions.

Insist on a copy of the offer document/key information memorandum before investing, and read it carefully.

Note that past performance of a scheme or a fund is not indicative of the scheme’s or the fund’s future performance. Past performance of a scheme may or may not be sustained in future.

Keep regular track of the NAV of the schemes in which you have invested

Ensure that you receive an account statement for the money that you have invested.

Don’t invest in a scheme just because somebody is offering you a commission or other incentives, gifts etc.
Don’t get carried away by the name of the scheme/mutual fund.
Don’t fall prey to promises of unrealistic returns.
Don’t forget to take note of risks involved in the investment.
Don’t hesitate to approach the proper authorities for redressal of your doubts/grievances.

Don’t deal with any agent/broker dealer who is not registered with the Association of Mutual Funds in India (AMFI).

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Buyback of Securities

Read the special resolution regarding the proposed buyback in detail and then vote for it.

Compare the price offered in the buyback with the market price during last few months as also with the company’s Earning per Share, Book Value etc. and then determine whether the price offered is reasonable.

Read the instructions for making the application for tendering of shares carefully.

Ensure that your application reaches the collection centre within the prescribed time.
If you don’t get the letter of offer within a reasonable period, contact the concerned Merchant Banker.
Mention all details as required in the letter of offer legibly.
Furnish all the documents asked for in the letter of offer.

Send application through the mode (post/courier/hand delivery/ ordinary post etc.) specified in the letter of offer.

Contact Merchant Banker if no response is received from the company regarding consideration for tendered shares within the stipulated time.

Contact Compliance Officer mentioned in the letter of offer in case of any grievance against the company.

Contact the Registrar of Companies in case you feel that provisions of the Companies Act have been violated.

Contact the Merchant Banker in case of any grievance against the procedure followed in the buyback.


Don’t submit multiple applications.

Don’t forget to fill up the application legibly.

Don’t mutilate the application form.

Don’t cross/ cut in the application form.

Don’t send the application form to a wrong address.

Don’t send the application form after the close of offer.

Don’t forget to give complete information in the application form.

Don’t forget to sign the application form.

Don’t give wrong/ contradictory information on the application form.

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Open Offers (under Takeover Regulations)


Ensure that you are aware of all competitive offers and revision of offer before deciding on accepting the offer

Refer to national dailies/ SEBI website for details of competitive offers or revisions of offers.

Note that the offer is subject to statutory approvals, if any, mentioned in the letter of offer

Check whether the offer will result in delisting of the company.

In case of demateralised equity shares, ensure credit is received to the Special Depository Account before the closure of the Offer.

Carefully note the timings/days for hand delivery of the documents mentioned in the letter of offer.

Wait till the last date for Offer Revision (i.e. 7 working days prior to date of closing of offer) before tendering your acceptance.

Submit the Form of Withdrawal accompanying the letter of offer at any specified collection center up to 3 working days before date of closing of the offer in case you want to withdraw the shares tendered.

Ensure that signatures on the Form of Acceptance, Transfer Deed, Depository Instruction and Form of Withdrawal are same and in the same order as those lodged with the company.

In case of non receipt of the Offer Document, you can tender or withdraw from the Offer by making an application on a plain paper giving the necessary details

Don’t wait for the last date for the closure of the offer for tendering your acceptance.
Don’t fill in the details of the buyer/transferee in the transfer deed to be sent.
Don’t file an incomplete application form/invalid documents.

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Collective Investment Schemes

Ensure that the entity is registered with SEBI.
Read the offer document of the scheme carefully.
Check the viability of the project.
Check and verify the background/expertise of the promoters.
Ensure clear and marketable title of the property/assets of the entity.

Ensure that the Collective Investment Management Company (CIMC) has the necessary infrastructure to carry out the activities of the scheme.

Check the credit rating of the scheme and tenure of the rating.
Check for the appraisal of the scheme and read the brief appraisal report.
Read carefully the objects of the scheme.
Check for the promise vis-a-vis performance of the earlier schemes, if any, in the offer document.
Ensure that the CIMC furnishes you with a copy of the Annual Report within two months from the closure of each financial year.
Note that SEBI cannot guarantee or undertake the repayment of money to the investors.
Don’t invest in any CIS entity not having SEBI registration.
Don’t get carried away by indicative returns.
Don’t invest based on market rumours or advertisements.

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