Mumbai: Securities and Exchange Board of India (SEBI) has eased rules for handling clients’ unpaid securities by stockbrokers, introducing a revised pledge framework aimed at improving operational efficiency and investor convenience.
New Framework for Unpaid Securities
Under the new rules, if a client buys shares but does not make full payment for them outside the Margin Trading Facility (MTF), those securities will still be credited directly to the client’s demat account.
However, these unpaid securities will now be automatically pledged in favour of a special account called the Client Unpaid Securities Pledgee Account (CUSPA), which must be opened by the trading member.
This automatic pledge will happen without requiring separate approval or instruction from the client.
Payment Window and Broker Rights
SEBI has asked brokers to clearly inform clients about pending payment obligations and the consequences of default.
Trading members must also create a formal policy explaining how unpaid securities will be handled, including pledge invocation, release and liquidation.
The policy must provide clients a maximum of five trading days from payout date to clear their dues.
If payment is not made within this period, brokers may invoke the pledge and sell the securities after giving reasonable notice to the client.
Any money left after recovering dues must be credited back to the client’s ledger.
Automatic Release Mechanism
SEBI has also introduced an automatic release system to protect investors.
If the broker neither invokes nor releases the pledge within five trading days after payout, depositories will automatically release the pledge on the sixth trading day.
Once released, the securities become freely available in the client’s demat account.
Restrictions and Implementation
SEBI clarified that securities pledged under CUSPA cannot be further pledged to banks or NBFCs for raising funds.
In special cases such as lower circuit restrictions or trading suspensions, brokers may seek an extension of up to one additional calendar week, but clients must be informed.
Stock exchanges must issue operational guidelines within 30 days. The new pledge framework will become effective three months after these guidelines, while extension-related rules will take effect after six months.
