LI Network
Published on: December 29, 2023 at 11:52 IST
The Securities and Exchange Board of India (Sebi) announced a relaxation in guidelines governing the settlement of running accounts containing clients’ funds or securities held by stock brokers. Under the new guidelines, stock brokers are now permitted to settle the running accounts of clients’ funds on the first Friday or Saturday of each quarter or month.
According to the revised framework, trading members will settle running accounts in alignment with clients’ preferences on a quarterly and monthly basis, taking into account the End of the Day (EOD) obligation of funds across all exchanges. The specified dates for settlement will be determined by stock exchanges.
In a bid to establish uniformity and clarity regarding the dates for monthly and quarterly settlement of client accounts, Sebi has urged stock exchanges to jointly release an annual calendar for such settlements at the commencement of each financial year.
To prevent the potential misuse of one client’s funds to settle another client’s running account, any funds received from clients will be retained in the upstreaming account.
This updated framework will become effective from the quarterly settlement of January-March 2024 and the monthly settlement of January 2024, as per Sebi’s circular.
Previously, under the existing framework, Sebi mandated the settlement of client’s funds’ running account on the first Friday of the quarter or month.
The decision to revise the guidelines was prompted by concerns raised by the Broker’s Industry Standards Forum (ISF), highlighting issues such as a single-day settlement leading to operational challenges, increased chances of errors, and delays in bank payments due to late finalization.
After considering these challenges, Sebi accepted the recommendation to allow the settlement of running accounts on Friday and/or Saturday.
This move aims to streamline the settlement process, facilitate ease of doing business for stakeholders like stock brokers and banks, and simultaneously ensure error-free settlements, safeguarding investor interests, according to the circular.
