Securities and Exchange Board of India. File | Photo source: Reuters
To enhance operational efficiency and reduce risk to customer securities, market regulator SEBI on May 5 decided to make a mandatory process of direct payment of such securities to the customer’s account.
This will come into effect from October 14, the Securities and Exchange Board of India (SEBI) said in a circular. Currently, the clearing corporation credits the payment of securities to the broker’s omnibus account, who then transfers it to the demat accounts of the respective client. Moreover, in February 2001, the possibility of direct delivery to investors was introduced.
After extensive deliberations with stock exchanges, clearing corporations (CCs) and depositories, SEBI has decided that “securities to be withdrawn will be credited by CC directly to the demat account of the concerned customer.”
Furthermore, clearing corporations should provide trading members (TMs) or clearing members (CMs) with a mechanism to identify unpaid securities and shares financed under the margin trading mechanism.
In case of any shortfall “arising from cross netting of positions between customers” – internal shortfalls – SEBI has suggested that the TM or CM should address such shortfalls in the auction process. Moreover, in such cases, brokers should not charge the client any fees over and above those charged by clearing corporations.
In May 2023, SEBI defined various customer securities handling processes for deposits and withdrawals of securities. This was intended to protect client securities and ensure that the stockbroker segregated the client or clients’ securities so that they were not susceptible to misuse.
