SEBI eases rules for brokerages on settling client accounts lying dormant for 30 days

The brokers' industry standard forum submitted that the earlier requirement necessitated TM (trading member) to identify such clients daily, potentially leading to the daily settlement of client funds and resulting in procedural inefficiencies.

The market regulator has eased the rules around settlement of accounts of brokerages' clients who have not traded over the last 30 days.

Previous directions from the Securities and Exchange Board of India (SEBI) asked brokerages to settle such accounts within three working days.

In a circular issued on January 6, SEBI has said that brokerages can settle the funds in such accounts on the upcoming settlement dates of monthly running account settlement cycle, as notified by the exchanges in the annual calendar.

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The circular said that, currently, " the account of clients who have not done any transaction in the last 30 days are required to be settled by the Trading Member (TM) within next three working days."

But after hearing representations from the Brokers' Industry Standards Forum (ISF), the regulator decided to revise these terms. As the circular said, "this requirement (of settling within three working days) necessitates TM (trading member) to identify such clients daily, potentially leading to the daily settlement of client funds and resulting in procedural inefficiencies".

It stated, "It has further been represented that since the client funds are anyway upstreamed to the clearing corporation, there is a need to revisit the time for settling such client’s funds."

Therefore, Clause 5.4 of the Circular dated June 16, 2021 and Clause 47.4 of the Master Circular (dated August 9, 2024) stands modified as under:

For the clients having credit balance, who have not done any transaction in the 30 calendar days since the last transaction and any amount of such client’s funds is lying with member for more than such 30 calendar days, the entire credit balance of client shall be returned to the client by TM, on the upcoming settlement dates of monthly running account settlement cycle (irrespective of settlement cycle preferred by the client) as stipulated by stock exchanges.

However, if the client trades after 30 calendar days and before aforesaid upcoming settlement dates of monthly running account settlement cycle, the settlement of account of client shall continue to be done by the Trading member as per the preference of quarterly/monthly as indicated by the client for running account settlement.