Sebi extends deadline on share pledging

New Delhi: Capital markets regulator Sebi on Thursday extended the deadline by two months to September 1 for implementation of the guidelines related to pledging and repledging of stocks for margin purpose.

With the implementation of the guidelines, Power of Attorney (PoA) would be replaced with Demat Debit and Pledge Instruction (DDPI) document. The guidelines, aimed at curbing possible misuse of PoA given by clients to stock brokers, were to come into effect from July 1.

"In view of the representation received from depositories and that the changes to the systems are still under process, it has been decided to extend the implementation date to September 1, 2022," the Securities and Exchange Board of India (Sebi) said in a circular.

With the DDPI, clients will explicitly agree to authorise the stock broker and depository participant to access their beneficial owners account for the limited purpose of meeting pay-in obligations for settlement of trades executed by them. The use of DDPI will be limited only for two purposes. One is for the transfer of securities held in the beneficial owner account of the client towards stock exchange related deliveries or settlement obligations arising out of trades executed by such a client.

The second purpose will be for pledging or re-pledging of securities in favour of the trading member or clearing member for the purpose of meeting margin requirements of the client. Once the guidelines come into force, PoA will no longer be executed for the two purposes. A client can use the DDPI or opt to complete the settlement by issuing physical Delivery Instruction Slip (DIS) or electronic Delivery Instruction Slip (eDIS) themselves.

However, the existing PoAs will continue to remain valid till the time client revokes the same. Thus, the stock broker and depository participant will not directly or indirectly compel the clients to execute the DDPI or deny services to the client if the client refuses to execute the DDPI.