**Executive Summary:**
SEBI circular SEBIHOMIRSDDOPPCIR2022101, dated July 27, 2022, modifies previous guidelines regarding the settlement of running account of clients' funds lying with Trading Members (TM). It standardizes the settlement process, setting specific dates for quarterly and monthly settlements. The provisions of this circular are applicable from October 1, 2022, and it requires Stock Exchanges to implement and monitor compliance.
**Key Points / Main Content:**
* **Purpose:** To ensure uniformity in the settlement of running accounts of clients' funds.
* **Applicability:** This circular pertains to the settlement of running account of clients' funds only. Settlement of running account for securities has been discontinued via earlier circular.
* **Settlement Schedule:**
* **Quarterly Settlement:** Funds shall be settled on the first Friday of each quarter (Apr-Jun, Jul-Sep, Oct-Dec, Jan-Mar) starting October 2022. If the first Friday is a trading holiday, settlement occurs on the previous trading day.
* **Monthly Settlement:** For clients opting for monthly settlements, running accounts shall be settled on the first Friday of every month. If the first Friday is a trading holiday, settlement occurs on the previous trading day.
* **End of Day (EOD) Obligations:** Settlement should be done by the TM considering the EOD obligation of funds on the date of settlement across all Exchanges.
* **Modification to Previous Circulars:**
* Clause 5.1 of the circular dated June 16, 2021, is modified.
* All other provisions in the circular dated June 16, 2021, shall continue to remain applicable.
**Impact Analysis:**
**Stock Exchanges:**
* *Impact:* Required to implement the new settlement guidelines and ensure member compliance.
* *Action Required:*
* Notify members about the circular's provisions and disseminate the information on their websites.
* Amend relevant Byelaws, Rules, and Regulations as necessary.
* Issue operational guidelines to members.
* Continue online monitoring of timely settlement of running accounts.
* Verify that excess client funds are not retained by the TM.
* Implement reporting requirements for TMs.
* Communicate implementation status to SEBI in their monthly development report.
**Trading Members (TM):**
* *Impact:* Must adhere to the standardized settlement schedule for clients' funds.
* *Action Required:*
* Settle running accounts of clients' funds as per the revised guidelines (quarterly or monthly).
* Consider End of Day (EOD) obligations across all exchanges on the settlement date.
* Comply with reporting requirements set by Stock Exchanges.
**Clients:**
* *Impact:* Running account of funds will be settled as per the revised schedule, ensuring periodic fund reconciliation.
* *Action Required:*
* Be aware of the new settlement schedule (either quarterly or monthly, based on their chosen preference).
**SEBI:**
* *Impact:* Responsible for overseeing the implementation and compliance of the circular.
* *Action Required:*
* Receive and review monthly development reports from Stock Exchanges regarding the implementation status.
Key Entities Referenced
Securities and Exchange Board of India (SEBI): The regulatory body issuing the circular and responsible for regulating securities markets in India.
All recognized Stock Exchanges: The entities to whom the circular is addressed and who are responsible for implementing the guidelines.
Trading Member (TM): Refers to the members of the stock exchanges who are involved in trading activities on behalf of clients.
Securities and Exchange Board of India Act, 1992: The act under which SEBI derives its power to issue the circular.
Running Account of Clients Funds: The main subject of the circular, referring to the funds held by trading members on behalf of their clients.
MIRSDSECir192009 dated December 03, 2009: A previous circular issued by SEBI related to the settlement of running accounts, which is being referenced and updated by this new circular.
SEBIHOMIRSDMIRSD2CIRP201695 dated September 26, 2016: Another previous circular issued by SEBI related to the settlement of running accounts, which is being referenced and updated by this new circular.
CIRHOMIRSDDOPCIRP201975 dated June 20, 2019: A previous circular issued by SEBI related to the settlement of running accounts, which is being referenced and updated by this new circular.
CIRCULAR
SEBI/HO/MIRSD/DOP/P/CIR/2022/101 July 27, 2022
To,
All recognized Stock Exchanges
Dear Sir/Madam,
Subject: Settlement of Running Account of Client’s Funds lying with Trading
Member (TM)
SEBI, vide circular no. MIRSD/SE/Cir-19/2009 dated December 03, 2009 and
SEBI/HO/MIRSD/MIRSD2/CIR/P/2016/95 dated September 26, 2016, issued the
guideline for settlement of running account of client’s funds / securities. As specified
by SEBI, the actual settlement of funds and securities shall be done by the member
depending on the mandate of the client and there must be a gap of maximum 90 / 30
days (as per the choice of client viz. Quarterly / Monthly) between two settlements of
running account.
2. Vide SEBI circular no. CIR/HO/MIRSD/DOP/CIR/P/2019/75 dated June 20, 2019,
settlement of running account for securities has been discontinued and therefore,
SEBI circulars dated December 03, 2009 and September 26, 2016, are now
applicable for settlement of running account of client’s “funds” only.
3. Further, vide SEBI circular no. SEBI/HO/MIRSD/DOP/P/CIR/2021/577 dated June
16, 2021, the aforementioned SEBI circulars dated December 03, 2009 and
September 26, 2016 on settlement of running account were partially modified.
4. Pursuant to extensive consultation with Stock Exchanges, in partial modification to
the aforementioned circular dated June 16, 2021 and to ensure uniformity in
settlement of running account, following has been decided:
4.1. The settlement of running account of funds of the client shall be done by the
TM after considering the End of the day (EOD) obligation of funds as on the
Page 1 of 3date of settlement across all the Exchanges on first Friday of the Quarter (i.e.,
Apr-Jun, Jul-Sep, Oct-Dec, Jan–Mar) for all the clients i.e., the running account
of funds shall be settled on first Friday of October 2022, January 2023, April
2023, July 2023 and so on for all the clients. If first Friday is a trading holiday,
then such settlement shall happen on the previous trading day.
4.2. For clients, who have opted for Monthly settlement, running account shall be
settled on first Friday of every month. If first Friday is a trading holiday, then
such settlement shall happen on the previous trading day.
4.3. Clause 5.1 of the circular dated June 16, 2021 is modified to this extent.
5. All other provisions in the circular dated June 16, 2021 shall continue to remain
applicable.
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 amendments to the relevant Bye-laws, Rules and Regulations ,as may
be necessary;
6.3. issue operational guidelines to their members in this regard;
6.4. continue online monitoring of timely settlement of running account for funds of
client and to verify that excess clients’ funds are not retained by the TM as on
the date of settlement of running account;
6.5. put in place an appropriate reporting requirement by TM to enforce the above
system; and
6.6. communicate the status of the implementation of the provisions of this Circular
in their monthly development report to SEBI.
7. The provisions of this circular shall be applicable with effect from October 1, 2022.
Page 2 of 38. 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
Aradhana Verma
Deputy General Manager
Tel. No: 022 26449633
aradhanad@sebi.gov.in
Page 3 of 3