Sebi bars members from pledging securities of clients

Last Updated 20 June 2019, 15:41 IST

Trading members have been barred from pledging to banks and NBFCs the securities of clients lying in certain accounts even with their authorisation, with markets regulator Sebi putting in place stricter norms.

The latest requirements, which also come against the backdrop of the crisis in the NBFC sector, would be effective from September 1.

This would be applicable for clients' securities lying with the Trading Member (TM)/ Clearing Member (CM) in client collateral, client margin trading securities and client unpaid securities accounts.

"Securities lying with TM/CM in client collateral account, client margin trading securities account and client unpaid securities account shall not be permitted to be pledged/transferred to Banks/NBFCs for raising funds by TM/CM," the regulator said in a circular.

Besides, "with regard to securities that have not been paid for in full by the clients (unpaid securities), a separate client account titled - client unpaid securities account - shall be opened by the TM/CM" the regulator added.

The regulator further said all the existing client securities accounts opened by the TM/CM other than pool account, client margin trading securities account and client collateral account shall be wound up on or before August 31.

The closing of specified accounts as well as the opening of clients' unpaid securities accounts need to be reported to respective exchanges/clearing corporation within a given time frame in a prescribed format, it said.

"Any non-compliance/non-reporting in this regard by the TM/CM shall attract penal action as per the bye-laws of the stock exchange," it added.

Sebi also asked exchanges and clearing corporations and depositories to put in place a monitoring mechanism with respect to the handling of clients' securities.

(Published 20 June 2019, 15:09 IST)

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