SEBI Eases Rules for Settling Dormant Client Accounts

resr 5paisa Research Team

Last Updated: 7th January 2025 - 05:26 pm

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The market regulator has relaxed the rules governing the settlement of brokerage clients' accounts that remain inactive for 30 days.

Previously, the Securities and Exchange Board of India (SEBI) mandated brokerages to settle such accounts within three working days.

In a circular dated January 6, SEBI stated that brokerages can now settle the funds in these accounts during the next scheduled monthly running account settlement date, as specified in the annual calendar released by stock exchanges.

The circular noted, "Accounts of clients who have not conducted any transactions in the last 30 days must currently be settled by the Trading Member (TM) within the next three working days."

Following representations from the Brokers' Industry Standards Forum (ISF), SEBI decided to amend this requirement. The circular explained, "The current rule requires TMs to identify inactive clients daily, which could lead to daily settlements of client funds, creating procedural inefficiencies."

It added, "Since client funds are already transferred to the clearing corporation, there is a need to reconsider the timeline for settling such accounts."

As a result, Clause 5.4 of the June 16, 2021 circular and Clause 47.4 of the August 9, 2024 Master Circular have been updated as follows:

For clients with credit balances who have not made any transactions for 30 calendar days, and whose funds have remained with the brokerage for over 30 days, the full credit balance must be returned to the client on the upcoming settlement date of the monthly running account cycle, regardless of the client’s chosen settlement preference.

However, if the client resumes trading after the 30-day period but before the scheduled monthly settlement date, the account settlement will follow the client’s selected preference for either monthly or quarterly settlement.

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