SEBI implements circular on Margin Obligation to be given by way of Pledge or Re Pledge in the Depository System

Jul 31, 2020 | by Avantis RegTech Legal Research Team

Industry Specific Compliance

The Securities and Exchange Board of India (SEBI) on July 29, 2020 has issued a circular for the implementation of SEBI circular on Margin obligations to be given by way of Pledge or Re Pledge in the Depository System. In view of the prevailing situation due to Coivid-19 pandemic, partial lockdowns in various areas of the country, representations received from the stock brokers and stock broker associations and that the changes to the systems and software development still under progress, it has been decided that further guidelines and relaxations are to be followed. 

Following guidelines have been given in the circular: 

• The mechanism of pledge or re-pledge issued vide circular no. SEBI/HO/MIRSD/DOP/CIR/P/2020/28 dated February 25, 2020 shall be implemented with effect from August 01, 2020. Trading member (TM) or Clearing member (CM) shall endeavour to align their systems and accept client collateral and margin funded stocks by way of creation of pledge or re-pledge in the Depository system. 

• The TM or CM shall also be allowed to accept client securities as collateral by way of title transfer into the Client Collateral Account as per the present system. The system of parallel acceptance of the client securities by way of title transfer shall be available only up to August 31, 2020 and no further extension shall be granted.

• Funded stocks held by the TM or CM under the margin trading facility shall preferably be held by the TM or CM by way of pledge with effect from August 01, 2020. TM or CM may continue to hold funded stocks in respect of margin funding in ‘Client Margin Trading Securities Account’ till August 31, 2020 by which date all such accounts shall be closed. 

• All the demat accounts tagged as “Client Margin Collateral” are to be closed by August 31, 2020. 

[Circular No. SEBI/HO/MIRSD/DOP/CIR/P/2020/143]


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