Executive Summary:
SEBI Circular SEBIHOMIRSDMIRSDPoD1PCIR20251, dated January 06, 2025, modifies the settlement of client accounts for those inactive for 30 days. It revises existing guidelines to ease business operations while safeguarding investor interests by mandating settlement on the upcoming monthly running account settlement cycle dates, as notified by Exchanges. This circular is effective immediately.
Key Points / Main Content:
* **Background:**
* Refers to SEBI Circular no. SEBIHOMIRSDDOPPCIR2021577 dated June 16, 2021, and Clause 47 of Master Circular for Stock Brokers dated August 09, 2024, regarding settlement of clients' funds.
* Brokers ISF represented that the previous requirement led to procedural inefficiencies and suggested revisiting the settlement timeframe.
* **Revised Settlement Rule:**
* Funds of clients inactive for 30 calendar days must be settled on the upcoming monthly running account settlement cycle dates, irrespective of the client's preferred settlement cycle.
* If a client trades after 30 days but before the settlement date, the original settlement preference (quarterly/monthly) applies.
* **Amendment to Existing Circulars:**
* Clause 5.4 of the Circular dated June 16, 2021, and Clause 47.4 of the Master Circular are modified accordingly.
* **Implementation:**
* The provisions of this circular are effective immediately.
Impact Analysis:
* Stock Exchanges:
* Impact: Required to communicate the circular's provisions to their members and disseminate the information on their websites.
* Action Required: Amend relevant Byelaws, Rules, and Regulations to implement the new direction.
* Trading Members (TM):
* Impact: Need to adjust their procedures for settling client accounts based on the revised rules for clients inactive for 30 days.
* Action Required: Implement changes to comply with the monthly settlement cycle for inactive accounts and adjust processes for clients who resume trading.
* Investors:
* Impact: Ensures timely return of funds if inactive for 30 days, settled on monthly running account settlement cycle dates.
* Action Required: No direct action required, but should be aware of the change in settlement procedures.
Key Entities Referenced
Securities and Exchange Board of India (SEBI): The regulatory body issuing the circular regarding settlement of client accounts.
Stock Exchanges: Entities regulated by SEBI, responsible for implementing the circular's provisions.
Circular no. SEBI/HO/MIRSD/DOP/CIR/2021/577 dated June 16, 2021: A previous SEBI circular providing guidelines on settlement of client funds, which is being modified by the current circular.
Master Circular for Stock Brokers dated August 09, 2024: A comprehensive circular for stock brokers, clause 47 of which is being modified by the current circular.
Trading Member (TM): A member of a stock exchange who is responsible for settling client accounts.
Brokers Industry Standards Forum (ISF): An industry body that provided recommendations leading to the revision of settlement requirements.
Securities and Exchange Board of India Act, 1992: The legal basis for SEBI's powers to issue the circular.
SEBI Stock Brokers Regulations, 1992: Regulations under which the circular is issued to protect investors and regulate securities markets.
CIRCULAR
SEBI/HO/MIRSD/MIRSD-PoD1/P/CIR/2025/1 January 06, 2025
To,
All recognized Stock Exchanges
Madam / Sir,
Sub: Measure for ease of doing business - Settlement of Account of Clients who
have not traded in the last 30 days
1. SEBI, vide Circular no. SEBI/HO/MIRSD/DOP/P/CIR/2021/577 dated June 16,
2021 (hereinafter mentioned as ‘Circular’) and Clause 47 of Master Circular for
Stock Brokers dated August 09, 2024 (hereinafter mentioned as ‘Master Circular’),
issued guidelines regarding settlement of running account of client’s funds by stock
brokers.
2. Currently, in terms of clause 5.4 of the Circular dated June 16, 2021 and clause
47.4 of the Master Circular, the account of clients who have not done any
transaction in the last 30 days are required to be settled by the Trading Member
(TM) within next three working days. It has been represented by Brokers’ Industry
Standards Forum (ISF) that this requirement necessitates TM to identify such
clients daily, potentially leading to the daily settlement of client funds and resulting
in procedural inefficiencies. It has further been represented that since the client
funds are anyway upstreamed to the clearing corporation, there is a need to revisit
the time for settling such client’s funds.
3. Based on the above coupled with the recommendations received from Brokers’ ISF
and with a view to facilitate ease of doing business as well as to safeguard the
investors’ interest, it has been decided to revise the requirement of mandatory
settlement of such clients’ funds. Accordingly, it has been decided that the funds
of such clients who have not traded in last 30 calendar days shall be settled on the
Page 1 of 3upcoming settlement dates of monthly running account settlement cycle as notified
by Exchanges in the annual calendar issued by them from time to time.
4. In view of the same, Clause 5.4 of the Circular dated June 16, 2021 and Clause
47.4 of the Master Circular stands modified as under:
For the clients having credit balance, who have not done any transaction in the 30
calendar days since the last transaction and any amount of such client’s funds is
lying with member for more than such 30 calendar days, the entire credit balance
of client shall be returned to the client by TM, on the upcoming settlement dates of
monthly running account settlement cycle (irrespective of settlement cycle
preferred by the client) as stipulated by stock exchanges.
However, if the client trades after 30 calendar days and before aforesaid upcoming
settlement dates of monthly running account settlement cycle, the settlement of
account of client shall continue to be done by the Trading member as per the
preference of quarterly/monthly as indicated by the client for running account
settlement.
5. The provisions of this circular shall come into force with immediate effect.
6. Stock Exchanges shall:
6.1. bring the provisions of this circular to the notice of their members and also
disseminate the same on their websites;
6.2. make necessary amendments to the relevant Bye-laws, Rules and Regulations
for the implementation of the above direction;
7. This circular is issued in exercise of powers conferred under Section 11(1) of
Chapter IV of the Securities and Exchange Board of India Act, 1992 read with
Regulation 30 of Chapter VII of SEBI (Stock Brokers) Regulations, 1992 to protect
the interests of investors in securities and to promote the development of, and to
regulate the securities markets.
Page 2 of 38. This circular is available on SEBI website at www.sebi.gov.in under the category:
‘Legal → Circulars’.
Yours faithfully,
Aradhana Verma
General Manager
Tel. No. 022-26449633
E-mail: aradhanad@sebi.gov.in
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