The Securities and Exchange Board of India (SEBI) on December 05, 2024, issued a Draft Circular for Public Comments Measure for ease of doing business on the Settlement of Accounts of Clients who have not traded in the last 30 days.
SEBI issued a circular that mandates Trading Members (TMs) to return the credit balance of clients who have not made any transactions in the last 30 days. This return must be done within the next three working days, regardless of when the client's running account was last settled. This was aimed at reducing the risk of misuse of client funds.
Industry Concerns and Proposal for Change:
Brokers, represented by the Brokers' ISF, have raised concerns regarding this mandate. They argue that the requirement to identify such inactive clients daily leads to inefficiencies, as it would necessitate daily settlement of client funds. Additionally, brokers point out that client funds are already up streamed to the Clearing Corporation, which mitigates the risk of misuse.
Proposed Solution: In response to these concerns, SEBI is considering a modification to the settlement process. Instead of requiring daily settlements for clients who have been inactive for 30 days, the funds of such clients would be settled on the next scheduled settlement date within the monthly running account settlement cycle, as per the exchange's annual calendar.
The objective of the Proposed Change:
Facilitating Ease of Doing Business: The proposed change aims to simplify the settlement process for brokers, reducing daily administrative burdens.
Safeguarding Investor Interests: The change still ensures that client funds are returned within a reasonable timeframe, addressing investor protection concerns while enhancing operational efficiency for brokers.
Key Impact
The modification will allow for the alignment of client fund settlements with the regular monthly settlement cycle, easing operational load while maintaining the security of client funds.
The comments/suggestions should be submitted latest by December 26, 2024, through the following link: https://www.sebi.gov.in/sebiweb/publiccommentv2/PublicCommentAction.do?doPublicComments=yes
In case of any technical issue in submitting your comment through web based public comments form, you may write to consultation [email protected] with the subject: "Public comments on Draft Circular -Measure for ease of doing business – Settlement of Account of Clients who have not traded in the last 30 days”.
[Circular No. SEBI/HO/MIRSD/MIRSD-PoD1/P/CIR/2024/XXX]
