Client securities: Sebi extends deadline by a month for trading members to implement new provisions

Markets regulator Sebi on Thursday extended deadline by one month for trading members to implement new provisions related to use of clients' securities.

The regulator in June barred trading members from pledging certain securities of clients to banks and non-banking financial companies (NBFCs) to raise funds even with their authorisation.

Besides, they were directed to open a separate 'client unpaid securities account' by August 31 with regard to securities that have not been paid in full by the clients.

Moreover, "all the existing client securities accounts opened by the trading member/clearing member other than 'pool account', 'client margin trading securities account' and 'client collateral account' shall be wound up on or before August 31, 2019," Sebi said in the June circular.

The new regulations of June also said "securities lying with trading member/clearing member in client collateral account, client margin trading securities account and client unpaid securities account shall not be permitted to be pledged/transferred to banks/NBFCs for raising funds by trading member/clearing member".

The provisions of the June circular were to be applicable from September 1.

However, "following representations from stock exchanges as well as market participants, it has been decided that effective deadline for implementation of guidelines prescribed in Clause 5 and Clause 8 of the Sebi (June) circular shall be extended by one month", the regulator said in a circular on Thursday.

Clause 5 pertains to winding up of securities other than the three client accounts and opening of 'client unpaid securities account' by August 31, while Clause 8 pertains to the deadline of applicability of provisions by September 1.