The Securities and Exchange Board of India (Sebi) on June 5, 2024 announced that from October 14, 2024, clearing corporations must transfer the clients’ securities into their dematerialised accounts directly. The move will be effective from October 14, Sebi said in a circular. Though this facility of direct transfer was available since February 1, 2001, it was voluntary, but will now become mandatory.
At present, there is a provision for clearing corporations to credit stocks to investors’ brokers who, in turn, credit the same to the respective investors. At times, this additional intervention from brokers give them an additional advantage to misuse such securities for other obligations.
From October 14, 2024 clearing corporations will credit securities directly to clients’ dematerialised accounts. Further, to make the system more effective, Sebi has asked clearing corporations to provide a mechanism for trading members or clearing members to identify the unpaid securities and funded stocks under the margin trading facility.
“Funded stocks held by the trading member or clearing member under the margin trading facility shall be held by them only by way of pledge. For this purpose, they shall be required to open a separate demat account tagged ‘Client Securities under Margin Funding Account’ in which only funded stocks in respect of margin funding shall be kept, and no other transactions shall be permitted,” Sebi said in the circular.
Such funded stocks will be transferred to respective client’s dematerialised account, followed by the creation of an auto-pledge (i.e., without the requirement of a specific instruction from the client) with suitable reason, in favour of ‘Client Securities under Margin Funding Account’, Sebi added.
If shortages arise due to inter-se netting of positions between clients, the trading member or clearing member shall handle such shortages through auction as specified by the clearing corporations, where the brokers shall not levy clients any additional charges over clearing corporations.
