Settlement of Running Account of Client’s Funds lying with Trading Member (TM)
Summary
This circular modifies guidelines for the settlement of running accounts regarding client funds held by Trading Members. It establishes specific rules for fund retention calculations, mandating actual bank payments rather than journal entries for settlements. Additionally, it requires Stock Exchanges to implement online monitoring systems to ensure compliance with these new provisions.
Text
SEBI issued earlier circulars for settlement of running account of client’s funds / securities, requiring a gap of maximum 90 / 30 days between settlements based on client choice.
Settlement of running account for securities has been discontinued and therefore, previous circulars are now applicable for settlement of client’s “funds” only.
TM shall accept collateral from the clients in the form of securities only by way of ‘margin pledge’ created in the Depository system.
The settlement of running account of funds of the client shall be done by the TM... at least once within a gap of 30 / 90 days between two settlements of running account as per the preference of the client.
In case of client having any outstanding trade position... a TM may retain funds calculated in the manner specified below...
Entire pay-in obligation of funds outstanding at the end of the day on settlement of running account, of T day & T-1 day.
Margin liability as on the date of settlement... TM may retain 225% of the total margin liability in all the segments across exchanges.
TM will first adjust the value of securities... accepted as collateral... and thereafter TM shall adjust the client funds.
It is clarified that the excess securities (in the form of margin pledge) or any cash equivalent collateral... need not be unpledged.
Client’s running account shall be considered settled only by making actual payment into client’s bank account and not by making any journal entries.
For the clients having credit balance, who have not done any transaction in the 30 calendar days since the last transaction, the credit balance shall be returned to the client by TM, within next three working days.
In cases where physical payment instrument... is issued... the date of realization of physical instrument into client’s bank account shall be considered as settlement date.
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Source: SecMarx — Settlement of Running Account of Client’s Funds lying with Trading Member (TM). Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.