Operational Mechanism
SEBI tweaks margin pledge rules to prevent brokers misusing client shares
This story was originally published at 21:14 IST on 3 June 2025
Register to read our real-time news.Informist, Tuesday, Jun. 3, 2025
NEW DELHI – The Securities and Exchange Board of India has come across instances of brokers invoking securities pledged by clients for margin purposes but not selling them to realise the moneys due to them. This has resulted in accumulation of clients' securities in brokers' dematerialised accounts, defeating the purpose for which the securities were invoked--realising moneys, according to the market regulator.
SEBI highlighted the matter in a circular issued Tuesday, which makes changes to the operational mechanism to initiate, release, and invoke margin pledges. The circular, which takes effect Sept. 5, is aimed at preventing misuse of clients' securities by brokers.
SEBI had earlier mandated that brokers can accept securities as collateral for margins from clients only by way of a "margin pledge". With invocations of pledged shares not resulting in the shares being sold, SEBI has now decided to make the invocation and sale a combined automated process.
In cases where clients have sold shares and offered those shares as margin pledge, depositories will provide the functionality of a single instruction in the form of pledge release for early pay-in to the trading or clearing member, SEBI said in the circular. The pledge will be released and early pay-in block will be set up immediately in the client's demat account subject to pay-in validation--only to the extent of the delivery obligation of that client as provided by the clearing corporation to the depository without the need for physical or electronic instruction, SEBI said. End
Reported by Rajesh Gajra
Edited by Rajeev Pai
For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.
Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.
Informist Media Tel +91 (11) 4220-1000
Send comments to feedback@informistmedia.com
© Informist Media Pvt. Ltd. 2025. All rights reserved.
To read more please subscribe
Share this Story:
