Clarification to Enhanced Supervision Circular
Summary
SEBI issues clarifications to its Enhanced Supervision Circular following representations from market participants and exchanges. Key changes include deleting specific clauses regarding proprietary account naming, modifying reporting requirements for stock brokers that are also banks, and adjusting data upload frequencies. The circular also restricts further exposure to clients with overdue debit balances and exempts Regional Commodity Exchanges from these provisions.
Text
SEBI issued guidelines for enhanced supervision via circular dated September 26, 2016, which were made effective from April 1, 2017, postponing various timelines based on prior representations.
Clauses 1.2.2 and 1.2.4 stand deleted; naming proprietary bank/demat accounts as 'Stock Broker- Proprietary Account' is voluntary. Accounts not falling under other specified clauses are deemed proprietary.
Clause 2.1.1 is inserted stating that a Stock Broker which is also Bank may be required to report only those bank accounts used for their stock broking activities.
Clause 2.5 modified to clarify that pledge of client securities is permitted only through the Depository system in compliance with Regulation 58 of the SEBI (Depositories and Participants) Regulations, 1996.
Stock brokers shall not grant further exposure to clients when debit balances arise from failure to pay and continue beyond the fifth trading day, except under margin trading facility rules.
Stock brokers shall upload data monthly instead of weekly till March 31, 2018. Thereafter, uploading shall revert to a weekly basis.
The provisions of this enhanced supervision circular are not applicable to Regional Commodity Exchanges till further notice.
Recipients are advised to take necessary steps to ensure compliance with the clarifications provided.
Stock Exchanges and Depositories are directed to bring the contents of this circular to the notice of Stock Brokers/Depository Participants and disseminate it on their websites.
This circular is issued in exercise of powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992.
Source: SecMarx — Clarification to Enhanced Supervision Circular. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.