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SEBI has observed that brokers have not been selling clients’ securities invoked under the margin pledge system on the same day, leading to an accumulation of securities in brokers’ demat accounts. This accumulation raises concerns over potential misuse, prompting the regulator to step in.
Under the new proposals, SEBI plans to introduce a system that blocks clients’ securities for early pay-in within the client’s demat account once invoked, preventing brokers from misusing them. The proposed system will also ensure a clearer transaction trail, improving the integrity of the margin pledge process.
Also Read: SEBI passes settlement order in National Peroxide case for ₹9.42 lakhThe draft circular also acknowledges operational challenges faced by brokers when selling pledged securities. Currently, brokers are required to un-pledge the securities before transferring them for settlement. To simplify the process, SEBI has proposed introducing a single instruction for “pledge release for pay-in,” enabling the release of the pledge and the setup of a pay-in block in the client’s demat account automatically.
Furthermore, depositories will be tasked with providing the necessary infrastructure to facilitate the new “pledge release for pay-in” system, ensuring compliance with the revised guidelines. The new process will eliminate the need for manual or electronic instructions for un-pledging and delivery, as the system will automatically validate the pay-in against the client’s obligation.
Once implemented, these changes are expected to better protect investors’ interests while ensuring that clients’ securities are safeguarded against potential misuse by brokers.
