TaxTMI 
TaxTMI 
Handling of Clients’ Securities by Trading Members/Clearing Members
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....92 specifies that the stock broker shall segregate securities or moneys of the client or clients or shall not use the securities or moneys of a client or clients for self or for any other client. 2. Further, the following circulars were issued by SEBI from time to time detailing the operational modalities with respect to handling of client's funds and securities by stock broker (hereinafter referred to as 'Trading Member /Clearing Member' or TM/CM): a) Circular No. SMD/SED/CIR/93/23321 dated November 18, 1993: In terms of clause 2 of the circular SEBI had inter alia specified that "it shall be compulsory for all member brokers to keep separate accounts for client's securities and to keep such books of accounts, as may b....
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....cified that "the member shall transfer securities from pool account to the respective beneficiary account of their client within 1 working day after the pay-out day. The securities lying in the pool account beyond the stipulated 1 working day shall attract a penalty at the rate of 6 basis point per week on the value of securities." Therefore, in terms of the above provisions, all TM/CM are required to transfer the clients securities received in pay-out to clients demat account within one working day. In case the client does not pay for such securities received in pay-out, then the TM/CM shall be entitled to retain those securities up to five trading days after pay-out. Further, where the client fails to meet its funds pay-in obligation w....
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.... the provisions of the SEBI circulars referred to in paragraph 2. 4. In order to provide clarity with respect to a TM/CM maintaining a running account for client securities and pledging the client securities with Banks/NBFCs, after discussions with the Exchanges, Depositories and Clearing Corporations, the following advice is issued:- 4.1 The securities received in pay-out against which payment has been made by clients, shall be transferred to the demat account of the respective clients within one working day of the pay-out. Such securities shall be transferred directly from the pool account of the TM/CM to the demat account of the respective client. 4.2 With regard to securities that have not been paid for in full by the clients (....
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....rgin Trading Facility also specifies that: a) For the purpose of providing the margin trading facility, a stock broker may use own funds or borrow funds from scheduled commercial banks and/or NBFCs regulated by RBI. A stock broker shall not be permitted to borrow funds from any other source. b) The stock broker shall not use the funds of any client for providing the margin trading facility to another client, even if the same is authorized by the first client. Also, SEBI vide Circular No. MRD/DOP/SE/Cir - 11/2008 dated April 17, 2008 had specified that client collateral/securities shall not be used for the purposes other than meeting client's margin requirements/pay-in. Referencing the above stated provisions, TMs/CMs....
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....RSD/MIRSD2/CIR/P/2017/64 dated June 22, 2017 stands deleted with effect from June 30, 2019. 5. Opening and reporting of Demat Accounts by TM/CM: In order to implement the above, the following course of action shall be taken by TM/CM: a) All the existing client securities accounts opened by the TM/CM other than 'Pool account'( including 'Early Pay-in'),'Client Margin Trading Securities account' and 'Client collateral account' shall be wound up on or before August 31, 2019.The TM/CM shall within one week of closure of existing client accounts, inform the Stock Exchange/s the details in the following format: Name of DP Account Number/ Client ID DP ID Name of Account PAN Date of Closing &n....
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....ount and client unpaid securities account shall not be permitted to be pledged/transferred to Banks/NBFCs for raising funds by TM/CM. 7. Accordingly, the provisions with regard to running account settlement of clients' funds and securities specified in SEBI Circulars MIRSD/ SE /Cir-19/2009 dated December 03, 2009 and SEBI/HO/MIRSD/MIRSD2/CIR/P/2016/95 dated September 26, 2016 shall stand modified to the extent as stated hereinabove and the said circulars shall be applicable only as guidelines for running account settlement of clients' "funds" only. 8. Unless otherwise specified in the circular the provisions of this circular shall come into effect on September 01, 2019. Any non-compliance of the provisions issued under this circular s....