Securities will now have to be directly transferred to the clients' demat accounts by the clearing corporations, stated the guidelines issued by the market regulator.
On June 5, the Securities and Exchange Board of India (Sebi) issued a circular titled "Enhancement of operational efficieny and Risk Reduction--Pay out of securities directly to client demat account". It will come into effect from October 14, 2024.
It stated, "This is to protect clients’ securities and to ensure that the stock broker segregates securities of the client or clients so that they are not vulnerable to misuse."
Currently, the broker securities received in payout are pooled by the broker and then credited to the respective client demat accounts.
As the circular stated, "The matter related to the funds of the clients has been addressed through upstreaming and downstreaming of funds mechanism. The matter related to flow of securities also needs to be addressed for the payout of securities."
This facility of direct transfer was already available on a voluntary basis from February 1, 2001. This has now been made mandatory.
Once the guidelines are operational, CCs will have to provide a mechanism for Trading Member(TM)/Clearing Members (CM) to identify the unpaid securities and funded stocks under the margin trading facility.
To enhance the framework, the Master Circular issued to the Stock Brokers on May 22, 2024, has been amended to allow for the creation of a separate demat account to hold stocks that were bought with margin trading facility and for the creation of an auto-pledge.
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