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Informist, Friday, Jul. 3, 2026

 

--SEBI amends rules on handling of clients' unpaid securities by brokers

 

MUMBAI - The Securities and Exchange Board of India Friday amended rules governing stock brokers' handling of clients' unpaid securities based on representations received from the brokers' industry standards forum. The changes align the rules with the current regulatory and market environment and address certain operational challenges encountered during implementation, SEBI said.

 

Although SEBI has outlined the changes to the master circular for stock brokers, it said they will take effect three months after stock exchanges issue operational guidelines. In the circular, SEBI has directed the exchanges to issue guidelines within 30 days.

 

A key change being made by SEBI pertains to the broker effecting the payout of the client's unpaid securities directly to the client's demat account, followed by the creation of an auto-pledge with the reason ‘unpaid' in favour of a separate account called 'client unpaid securities pledgee account'. Currently, this requirement applies to all of a client's trades. SEBI's new amendment excludes the client's trades covered under the margin trading facility from this requirement.

 

The amended rules will also require stockbrokers to formulate a specific policy for handling unpaid securities in line with SEBI's rules. The policy must cover clear processes and indicate the reasons, manner, and timing for the invocation or release of the pledge and the liquidation of unpaid securities.

 

It must also indicate the maximum period, not to exceed five trading days from the payout date, within which the client must meet the payment obligation. In the event the client fails to meet the payment obligation within the specified timeline, the broker can invoke the pledge and sell the unpaid securities, SEBI said.  End

 

Reported by Rajesh Gajra

Edited by Saji George Titus

 

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