Sebi issues unpaid securities guidelines

PTI

New Delhi

The Securities and Exchange Board of India (Sebi) on Friday, July 3, issued a regulatory framework for trading members (TMs) to handle clients' unpaid securities, introducing an auto-pledge mechanism alongside new investor safeguards.

Under the framework, if trades executed outside the Margin Trading Facility (MTF) remain unpaid, the securities will be credited directly to the client's demat account. Instead of withholding the securities, an auto-pledge will be created in favour of a dedicated account of the trading member—the Client Unpaid Securities Pledgee Account (CUSPA)—without requiring specific instructions or approval from the client. The pledge must be specifically marked as “unpaid” per Sebi guidelines.

After the pledge is created, the TM is required to inform the client via email or SMS regarding the payment obligation and the member's right to liquidate the securities if dues remain unpaid.

The regulator has directed TMs to formulate and maintain a policy for handling unpaid securities, either as a standalone policy or as part of their risk management framework, in line with guidelines issued by stock exchanges. This policy must be communicated to clients before implementation. It should clearly specify the reasons, manner, and timeline for the invocation or release of the pledge and the liquidation of securities.