Executive Summary:
This SEBI circular clarifies guidelines for stock brokers maintaining current accounts in multiple banks, addressing issues raised due to conflicting RBI circulars. It allows brokers to maintain necessary accounts for client funds, settlement purposes, and exchange dues, provided the accounts are used for their defined purposes. The circular aims to facilitate seamless fund settlement and investor convenience.
Key Points / Main Content:
Background and Context:
* SEBI mandates separate accounts for client and proprietary funds (circular no. SMDSEDCIR9323321 dated November 18, 1993).
* SEBI provided guidelines for uniform nomenclature of bank accounts, including "Name of Stock Broker Client Account" and "Name of Stock Broker Settlement Account" (circular no. SEBIHOMIRSDMIRSD2CIRP201695 dated September 26, 2016 and CIRHOMIRSDMIRSD2CIRP201764 dated June 22, 2017).
* RBI circulars restricted current accounts for those with credit facilities (DOR.No.BP.BC721.04.048202021 dated August 06, 2020), but later permitted specific accounts stipulated by other regulators (DOR.No.BP.BC.3021.04.048202021 dated December 14, 2020).
Clarification on Current Accounts:
* Stock Brokers can maintain current accounts in multiple banks for:
* Client Funds (Client Account)
* Settlement Purposes (Settlement Account)
* Exchange Dues Account (if mandated by Stock Exchanges)
* Maintenance of these accounts is subject to limits prescribed by Stock Exchanges/SEBI.
* Brokers must use these accounts for their defined purposes.
Impact Analysis:
Stock Brokers:
* Impact: Allowed to maintain multiple current accounts for specific purposes, facilitating smoother operations, and fund management.
* Action Required: Ensure accounts are used only for their defined purposes (client funds, settlement, exchange dues) and comply with account number limits set by Stock Exchanges/SEBI.
Stock Exchanges:
* Impact: Responsible for prescribing maximum limits for the number of current accounts stock brokers can maintain.
* Action Required: Define and communicate the maximum limit for current accounts to stock brokers.
Investors:
* Impact: Benefits from seamless settlement of funds due to the clarified guidelines for stock brokers' bank accounts.
* Action Required: No direct action required.
Key Entities Referenced
Securities and Exchange Board of India (SEBI): The regulatory body for securities markets in India, responsible for protecting investors' interests and regulating the securities market.
Stock Brokers: Entities that are members of recognized stock exchanges and facilitate the buying and selling of securities for clients.
Reserve Bank of India (RBI): The central bank of India, responsible for regulating the banking system and issuing currency.
Securities and Exchange Board of India Act, 1992: The legislation that established SEBI and defines its powers and functions.
Client Account: Bank accounts held by Stock Brokers to keep the money of the clients in a separate account
Settlement Account: Bank accounts held by Stock Brokers for the purpose of settlement
DOR.No.BP.BC721.04.048202021 dated August 06, 2020: RBI circular restricting opening of current accounts for customers with credit facilities.
DOR.No.BP.BC.3021.04.048202021 dated December 14, 2020: RBI circular that permitted banks to open specific accounts stipulated under various statutes and instruction of other regulators.
CIRCULAR
SEBI/HO/MIRSD/DOP/P/CIR/2021/653 October 28, 2021
To,
All Recognized Stock Exchanges
Stock Brokers through Recognized Stock Exchanges
Dear Sir/Madam,
Subject: Maintenance of current accounts in multiple banks by Stock Brokers
1. SEBI vide circular no. SMD/SED/CIR/93/23321 dated November 18, 1993 on
“Regulation of Transactions between Clients and Brokers” mandated that all the
brokers shall keep the money of the clients in a separate account and their own
money in a separate account. Further, SEBI vide circular no.
SEBI/HO/MIRSD/MIRSD2/CIR/P/2016/95 dated September 26, 2016 on
“Enhanced Supervision of Stock Broker/Depository Participants” and
CIR/HO/MIRSD/MIRSD2/CIR/P/2017/64 dated June 22, 2017 on “Clarification to
Enhanced Supervision Circular” provided guidelines on uniform nomenclature to
be followed by Stock Brokers for naming and tagging of bank accounts according
to which Bank account(s) which hold clients funds shall be named as "Name of
Stock Broker -Client Account", Bank account(s) held for the purpose of settlement
would be named as "Name of Stock Broker - Settlement Account" and that naming
of proprietary bank account is voluntary and all accounts which are not named as
Client/Settlement account would be deemed to be proprietary accounts.
2. Reserve Bank of India (RBI) has issued a circular no.
DOR.No.BP.BC/7/21.04.048/2020-21 dated August 06, 2020 according to which
banks shall not open current accounts for customers who have availed credit
facilities in the form of cash credit (CC)/ overdraft (OD) from the banking system
and all transactions shall be routed through the CC/OD account. However, on a
review, RBI vide circular no. DOR.No.BP.BC.30/21.04.048/2020-21 dated
December 14, 2020 has permitted banks to open specific accounts which are
stipulated under various statutes and instruction of other regulators/regulatory
departments, without any restrictions placed in terms of the RBI circular dated
August 06, 2020.
3. SEBI has received representations regarding the issue being faced by Stock
Brokers in view of the aforementioned circulars issued by RBI, and was requested
Page 1 of 2to issue instructions to Stock Brokers in respect of maintenance of current
accounts in multiple banks.
4. In order to facilitate seamless settlement of funds and for the convenience of
investors, it is clarified that Stock Brokers should maintain current accounts in
appropriate number of banks (subject to the maximum limit prescribed by Stock
Exchanges/SEBI from time to time) for holding the client funds (i.e., Client
Account), for settlement purposes (i.e., Settlement Account) and any other
accounts mandated by Stock Exchanges such as Exchange Dues Account subject
to the condition that brokers are using these accounts for their defined purposes.
5. This circular is issued in exercise of powers conferred under Section 11(1) of the
Securities and Exchange Board of India Act, 1992, to protect the interests of
investors in securities and to promote the development of, and to regulate the
securities markets.
Yours faithfully,
Narendra Rawat
General Manager
Market Intermediaries Regulation and Supervision Department
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