Sebi issues new guidelines for stock brokers regarding settlement of running accounts

New Delhi: Capital markets regulator Sebi on Thursday eased guidelines for settlement of running accounts of clients' funds or securities lying with stock brokers. Now, stock brokers can settle the running account of clients' funds on the first Friday or Saturday of the quarter or month. The trading members, after considering the End of the Day (EOD) obligation of funds across all the exchanges, will settle the running accounts at the choice of the clients on a quarterly and monthly basis, on the dates stipulated by the stock exchanges.

To ensure uniformity and clarity on dates of such monthly and quarterly settlement of client accounts, Sebi asked stock exchanges to jointly issue the annual calendar for the settlement of running accounts (quarterly and monthly) at the beginning of the financial year. Further, to safeguard against any possibility of misuse of one client's funds to settle another clients' running account, any funds received from clients will remain in the upstreaming account.

The new framework will be applicable from the quarterly settlement of January-March 2024 and monthly settlement of January 2024, the Securities and Exchange Board of India (Sebi) said in a circular. Sebi, under the current framework, had mandated settlement of the running account of the client's funds on the first Friday of the quarter or month. The move came after the Broker's Industry Standards Forum (ISF) had represented various problems faced by brokers due to a single day of settlement -- hectic activities on the day of settlement leading to chances of errors, missing out on payment timings of banks due to late finalization, delayed instructions among others.

Also, they recommended that trading members should be allowed to settle the running account of clients on Friday and/or Saturday to address these operational difficulties. “After due consideration, Sebi has decided to accept the recommendation to settle the running account of clients on Friday and/or Saturday, which streamlines the process of settlement and ensures ease of doing business for various stakeholders viz. stock brokers and banks, while at the same time safeguarding the interests of the investors by ensuring error free settlement,” according to the circular.