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Informist, Tuesday, Feb. 11, 2025

MUMBAI – The Securities and Exchange Board of India Tuesday proposed some changes related to unclaimed funds and securities with trading members. The regulator has proposed to put untraceable or unreachable clients under 'enquiry status'. 

This move comes against the backdrop of a staggering amount of unclaimed securities and funds with stock brokers. The total value of unclaimed funds was nearly INR 3.23 billion and that of unclaimed securities was nearly INR 1.82 billion as on Jan. 31, SEBI said. In a bid to protect the investors' interest SEBI has laid out some proposals in a consultation paper and invited comments from investors and market participants by Mar. 4.

If the trading member, or the stock broker, has been declared defaulter, all the unclaimed funds upstreamed by the broker to the Clearing Corporation will be down-streamed and transferred directly to the dedicated bank account of a designated stock exchange, the market watchdog proposed. The stock broker will chose one of the exchanges having nation-wide terminals as the designated stock exchange to transfer the unclaimed funds and also to pledge unclaimed securities. 

If funds remain unclaimed for one year since being tagged, this, along with the accrued interest, should be downstreamed to the bank account of the designated stock exchange on a quartrely basis within seven days from the end of each quarter, SEBI said. Stock brokers will be required to make at least six attempts of reaching out to the clients before unclaimed funds are transferred to the said bank account.

For the funds unclaimed for more than a year as on date of implementation of the new guidlines, the watchdog said these should be transferred to the bank account of the designated stock exchanges within 30 days. If the stock broker receives a claim before the funds or securities are transferred or pledged to the exchange, they should verify the genuineness of the claim and settle it within a period of five working days, SEBI proposed.

For funds unclaimed for three years with the designated stock exchange, SEBI proposed to transfer such funds to Investor Protection Funds of the designated stock exchanges on quarterly basis within seven working days from the end of each quarter. The market regulator proposed to put a minimum value limit over allowing further claims on funds already transferred to Investor Protection Funds. If the total amount of unclaimed funds, including accrued interest, is upto INR 100 for a client then a claim on such funds should not be permitted, SEBI said.

On the other hand, for unclaimed securities, SEBI said the stock brokers should pledge these securities after these remain unclaimed for seven days. The pledge should be in the favor of a demat account of the designated stock exchange on a weekly basis within three working days from the end of every week, SEBI added. Any benefits such as dividend, bonus, among others received on such pledged securities should be credited in the respective client ledger and shall be transferred or pledged to the exchange on a quarterly basis within seven working days from the end of every quarter, the consultation paper further proposed.

The stock exchanges and stock brokers will provide a search facility on their websites for clients, nominees, and legal heirs to enquire about unclaimed funds and securities, SEBI proposed.  End

Reported by Aman Aryan

Edited by Deepshikha Bhardwaj

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