The Securities and Exchange Board of India (SEBI) on June 08, 2023, issued a Circular regarding the Upstreaming of clients’ funds by Stock Brokers/Clearing Members to Clearing Corporations
This Circular aims to protect the interests of investors in securities and to promote the development and to regulate the securities markets
The provisions of this circular shall come into effect from July 01, 2023
The following has been stated namely: -
• It states that with a view to safeguarding clients’ funds placed with SBS/CMs, it has been decided to require the upstreaming of all client funds received by SBs/CMs to the Clearing Corporations (CCs).
• Under this framework, no clients’ funds shall be retained by SBs/ CMs on End of Day basis. The clients’ funds shall all be upstreamed by SB/ CMs to CCs only in the form of either cash, a lien on FDR, or a pledge of units of Mutual Fund Overnight Schemes.
• It states that to improve operational efficiency and reduce transaction costs, CCs shall build a mechanism for utilization of surplus unutilized collateral (i.e. collateral in excess of margin blocked) lying with CC in cash form, towards fund pay-in requirements across segments.
• The provisions of this framework shall not be applicable to bank-CMs (including Custodians that are banks), and for proprietary funds of SBs/CMs in any segment and SB’s proprietary funds deposited with CM in the capacity of a client.
• The stock exchanges and CCs shall create an SOP for monitoring the implementation of provisions of this Circular and put in place a uniform penalty structure for non-compliance.
• The stock exchanges, depositories, and clearing corporations are directed to perform the following functions namely: -
(i) bring the provisions of this circular to the notice of stock brokers, depository participants, and clearing members, as the case may be, and also disseminate the same on their websites
(ii) make amendments to the relevant bye-laws, rules, and regulations for the implementation of the above provisions
(iii) communicate to SEBI, the status of the implementation of the provisions of this circular in their monthly development report and. monitor compliance with this circular, and submit a compliance report to SEBI in this regard by August 31, 2023
[Circular No. SEBI/HO/MIRSD/MIRSD-PoD-1/P/CIR/2023/084]
