The Securities and Exchange Board of India (SEBI) on December 12, 2023, issued a circular regarding the Upstreaming of clients’ funds by Stock Brokers (SB) and Clearing Members (CM) to Clearing Corporations (CC)
This shall come into force on December 12, 2023
The following has been stated namely: -
• This has a reference to SEBI circular no. SEBI/HO/MIRSD/MIRSD-PoD-1/P/CIR/2023/084 dated June 08, 2023, and circular no. SEBI/HO/MIRSD/MIRSD-PoD-1/P/CIR/2023/110 dated June 30, 2023, specified the framework requiring SB/CMs to upstream placed with clients’ funds to CC
• It states that the SBs/CMs shall upstream all the clients’ clear credit balances to CCs on an end-of-day basis. Such upstreaming shall be done only in the form of either cash, lien on Fixed Deposit Receipts created out of clients’ funds, or pledge of units of Mutual Fund Overnight Schemes created out of clients’ funds.
• It states that the CMs, who clear trades for other SBs, shall only use the designated bank accounts maintained with the nomenclature “Name of the CM –TM prop account” to receive/pay proprietary funds to or from stock brokers.
• The clients shall request SBs/CMs to release funds at any time during the day. The processing of such release requests shall be as per the respective risk management practices of SB/CMs.
• All payment requests of the client received on a day shall be processed on or before the next settlement day. In cases, where the payment request is not processed on the same day, SB/CMs need to ensure that the funds of the client are placed with CC in terms of this circular.
• It further states that 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) jointly issue the following within 15 days from the date of issuance of this circular
(a) operational guidelines in consultation with relevant stakeholders.
(b) SOP for monitoring the implementation of provisions of this circular (including determination of cut-off times)
(c) a penalty structure for non-compliance.
(iii) make amendments to the relevant bylaws, rules, and regulations for the implementation of the provisions and communicate to SEBI, the status of the implementation of the provisions of this circular in their monthly development report.
[Circular No. SEBI/HO/MIRSD/MIRSD-PoD-1/P/CIR/2023/187]
