Markets regulator Sebi on September 28 asked exchanges and clearing corporations to initiate measures for liquidating assets of defaulter members within six months of declaring the entities concerned as defaulters.
The watchdog has directed that required measures have to be taken before the appropriate court of law to liquidate moveable and immoveable assets that are not in possession of stock exchanges and clearing corporations.
The recovery of assets would help in meeting the obligations of clients, stock exchanges and clearing corporations, the Securities and Exchange Board of India (Sebi) said in a circular. A recognised stock exchange acts as a first-level regulator in the securities market, in so far as trading on its platform by its members is concerned.
Sebi noted that in certain cases, there is shortfall of funds or securities with defaulter member to meet the obligation of clients/stock exchanges (SEs) and clearing corporations (CCs). "The SE/CC are advised to initiate suitable actions for liquidating the assets (movable and immovable) of defaulter member, including that of debit balance clients (to the extent of debit balance), within six months of declaration of defaulter, for recovery of the assets not in possession of the SE/CC, before appropriate court of law," Sebi said.
Under the norms, stock exchanges can declare a member as defaulter when, among other reasons, the member is not able to fulfil its obligations.