Capital markets watchdog Sebi Monday came out with a new framework for utilisation of financial security deposits available with clearing corporations, warehouse development and regulatory authority in order to rationalise such deposits.
At present, on the same goods, security deposits are required to be maintained with both WDRA (warehouse development and regulatory authority) and clearing corporations, putting additional financial burden on warehouse operators.
In order to rationalise financial security deposit (FSD) and, after consultation with WDRA and clearing corporations, Sebi in a circular said clearing corporations having commodity derivatives segment would need to adhere to the new norms laid by the regulator for utilisation of such deposits.
The new framework will be effective from 30 days.
Under the framework, the clearing corporations after the accreditation will immediately provide the details of WDRA registered warehouses accredited by them with full details of warehouseman registration, warehouse service provider (WSP) to WDRA.
WDRA will in turn, share the details of security deposit received from these accredited warehouses to the respective clearing corporations. Further, clearing corporations will inform the changes, if any, with respect to these warehouses to enable WDRA to provide the required information.
Moreover, WDRA will also inform clearing corporations of any hanges, if any, in the security deposit placed by such warehouses with WDRA.
According to Sebi, the accredited WSP will be liable for any losses resulting from any action or inaction on its part or on the part of its warehouses that prevents the buyer or seller from exercising, in whole or in part, their rights.
The clearing corporation will have to compensate the aggrieved clients for any such losses that have been appropriately established by debiting the FSD of WSP held with the clearing corporation, in accordance with its applicable rules.
In case the FSD available at clearing corporation is not sufficient to compensate for the loss, clearing corporation will have to make part compensation with the FSD available with it and, the security deposit available with WDRA will be made available to such corporation within seven days of the release request from such corporation to WDRA, for settlement of the remaining claims.
The settlement of security deposit by WDRA originates only after the stocks stored, if any, are disposed off by the holder.
This arrangement is only for stocks stored in WDRA or clearing corporation accredited warehouses for the purpose of delivery on exchange platform. The discrepancy noted by any agency (clearing corporation or WDRA) will be brought to the notice of other agency irrespective of invoking the security deposits.
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