The Securities and Exchange Board of India (SEBI) on February 11, 2025, issued a Consultation Paper on “Treatment of unclaimed funds and securities of clients lying with Trading Members (TMs)”.
The consultation paper is issued to protect the interest of investors, a mechanism to be introduced for treatment of unclaimed funds and securities of investors lying with the TMs.
It is stated that TMs are required to settle the credit balance of clients lying with them on the first Friday and/or Saturday of every month or quarter.
In case a member is unable to settle the client accounts due to non-availability of bank accounts or non-traceability of clients, etc., as per stock exchange guidelines, TMs shall make all efforts to trace the clients to settle their funds lying with them and maintain an audit trail for such efforts made for tracing the clients.
The proposed process for treatment of unclaimed funds and securities (both in physical and Demat mode) lying with the TMs is as under:
• If the funds or securities could not be credited to the client bank account or demat account in the normal course of business, or the client is not reachable, such client accounts shall immediately be put under ‘enquiry status’. The TM(s) shall contact the clients through letters, e-mails, telephonically or any other means as feasible. TMs shall upstream such funds to clearing corporations as per upstreaming guidelines issued by SEBI, Exchanges and CCs.
• To ensure that unclaimed funds and/or securities of clients lying with the TMs are returned to the respective clients in a timely and efficient manner, in addition to the obligations of TMs with regard to running account settlement.
• TMs (Trading Members) must safely manage unclaimed client funds, investing them in low-risk options like Liquid and Overnight Mutual Fund Schemes or Fixed Deposits (FDs). These investments should be easily redeemable and transferred to the Clearing Corporation (CC) within 30 days. The goal is to generate some income on the unclaimed funds while maintaining safety and liquidity. Investments should follow SEBI guidelines, and TMs must ensure the funds can be redeemed without additional costs when needed, including the transfer to the Depository Participant (DSE) after one year.
Public comments are invited on the proposal for treatment of unclaimed funds and securities of clients lying with Trading Members. The comments/ suggestions should be submitted latest by March 04, 2025 through the following link: https://www.sebi.gov.in/sebiweb/publiccommentv2/PublicCommentAction.do?doPublicComments=yes
For more details, please refer to the document provided below.
