The market watchdog SEBI has come up with a new norm that will help reduce brokerage houses’ burdens. SEBI has simplified the settlement norms applicable to brokerage accounts, which are inactive for more than thirty days. Funds lying in inactive brokerage accounts will be returned on the settlement date scheduled in the next month as per the annual calendars of the stock exchanges.
How will it simplify the process?
The new norms by SEBI for inactive brokerage accounts settlement can simplify the entire settlement process as earlier brokers needed to return the funds in these inactive accounts within three working days after inactivity was established. Due to this very short period of settlement, the brokerage houses had to face challenges and the Brokers’ Industry Standards Forum (ISF) considered the challenges and raised concerns regarding the same. The client’s funds were held securely by the clearing corporations and thus the challenges faced by the brokerage houses were unnecessary.
New Norms for Settlement
As per the new sebi norms, if stock brokerage accounts are inactive for more than thirty days, then they are going to be identified as inactive. The settlement of the funds in these accounts will be done on the next monthly settlement date as scheduled in the annual stock exchange’s calendar. Now this is irrespective of the fact whether the client of the inactive account opted for a monthly or quarterly cycle of settlement.
In case activity resumes in the identified inactive account within the monthly settlement date, then the funds in the account will be taken care of as per the settlement option chosen by the account holder.
The new sebi norms are immediately effective and stock exchanges, clearinghouses, and other members are required to update their compliance and regulations accordingly.
Wrapping up
The new norms will help reduce the burden on the brokerage houses of settling all the funds in the inactive accounts within three days which is a very short period and that too when the funds are secured with the clearing corporations. This new norm for the settlement of inactive brokerage accounts will help the brokerage houses to settle funds smoothly without facing any crisis.
Source: CNBC TV18
______________________________________________________________________________________
Disclaimer: Investments in the securities market are subject to market risks; read all the related documents carefully before investing.