Direct Payout to Clients' Demat Accounts: SEBI Extends Deadline to 11th November

Moneylife Digital Team 11 October 2024

Investor Interest

Market regulator Securities and Exchange Board of India (SEBI) extended the deadline to implement guidelines mandating the direct payout of securities to clients' demat accounts to 11th November from 14 October 2024. SEBI also revised the timing of the payout of securities to 3:30pm from 1:30pm to allow securities to be credited to the clients' demat account on the same settlement day instead of one working day.

SEBI's 5th June circular mandated the payout of securities directly to the client's demat account based on final operational guidelines or implementation standards issued by clearing corporations (CCs). However, CCs issued the guidelines in the end of August based on extensive consultation in the Brokers' Industry Standards Forum (Brokers' ISF).

"Further, based on the review meeting held by SEBI with market infrastructure institutions (MIIs) and based on the representation received from Brokers' ISF, it has been decided that the circular shall come into effect from 11 November 2024 to ensure smooth implementation of payout of securities directly to the client's demat account, without any disruption to the markets players and investors," SEBI says.

Separately, the market regulator says as per the 5th June circular, under phase -1, the securities for payout in the equity cash segment, including netted cash and futures and options (F&O) physical settlement, should be credited directly to the respective client's demat account by the clearing corporations.

"As a consequence of the above, the timing of the payout of securities shall be revised from 1:30pm to 3:30pm. Thus, as a result of direct payout, the securities shall be credited to the clients' demat account on the same settlement day instead of one working day from the receipt of payout from the clearing corporation," SEBI says.

In June this year, SEBI decided to make the direct payout of such securities to the client's account mandatory from 14 October 2024 to enhance operational efficiency and reduce the risk to clients' securities.

At present, a clearing corporation (CC) credits the payout of securities in the pool account of the broker, who then credits the same to their client's demat accounts.

Earlier in March, SEBI issued a master circular for stock brokers specifying various processes for handling of clients' securities with regard to pay-in and payout of securities. "This is to protect clients' securities and to ensure that the stock broker segregates securities of the client or clients so that they are not vulnerable to misuse," the regulator says.

SEBI says it had extensive discussions with the stock exchanges, CCs and depositories. The proposal was also discussed in the meeting of the intermediary advisory committee and with the broker's Industry Standards Forum (ISF), which comprises industry representatives.

After extensive deliberations, SEBI has decided that the CCs will credit the securities for payout directly to the respective client's demat account. CCs shall provide a mechanism for trading members (TMs) and clearing members (CMs) to identify unpaid securities and funded stocks under the margin trading facility.

Regarding unpaid securities, the processes specified in para 45 of 'Master Circular for Stock Brokers" dated 22 May 2024 will be applicable, SEBI clarifies.

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