The Securities and Exchange Board of India on 11th November 2022, notified new guidelines to further streamline the process of handling of unpaid securities by TM/CM and also to prevent any kind of misuse of such unpaid securities. This new guidelines shall come into force from 31st March 2023.
SEBI after extensive consultations with Exchanges, Depositories and Clearing Corporations, the following has been decided:
- All the securities received in pay-out, shall be transferred to the demat account of the respective clients directly from the pool account of the TM/CM within one working day of the pay-out
- With regard to the unpaid securities (i.e., the securities that have not been paid for in full by the clients), such securities shall be transferred to respective client’s demat account followed by creation of an auto-pledge (i.e., without any specific instruction from the client) with the reason “unpaid”, in favor of a separate account titled – “client unpaid securities pledgee account”, which shall be opened by TM/CM.
- After the creation of pledge, a communication (email / SMS) shall be sent by TM/CM informing the client about their funds obligation and also about the right of TM/CM to sell such securities in event of failure by client to fulfill their obligation.
- If the client fulfills its funds obligation within five trading days after the payout, TM/CM shall release the pledge so that the securities are available to the client as free balance.
- If the client does not fulfill its funds obligation, TM / CM shall dispose off such unpaid securities in the market within five trading days after the pay-out. TM/CM, before disposing the securities, shall give an intimation (email / SMS) to the client, one trading day before such sale.
- The unpaid securities shall be sold in the market with the Unique Client Code (UCC) of the respective client. Profit/loss on the sale transaction of the unpaid securities, if any, shall be transferred to/adjusted from the respective client account.
- TM / CM shall invoke the pledge only against the delivery obligation of the client. On invocation, the securities shall be blocked for early pay-in in the client’s demat account with a trail being maintained in the TM/CM’s client unpaid securities pledgee account.
- All the existing “client unpaid securities accounts” shall be wound up on or before April 15, 2023. The securities lying in such accounts shall either be disposed off in the market or be transferred to the client’s demat account by the TM/CM accordingly, failing which such accounts shall be frozen for debit and credit.
