New guidelines for Settlement of Running Account of Clients Funds by Trading Members
Settlement of Running Account of Client’s Funds lying with Trading Member (TM)
SEBI had issued guideline for settlement of running account of client’s funds / securities. As per the new guidelines, the actual settlement of funds and securities was to be done by the member depending on the mandate of the client and there must be a gap of maximum 90 / 30 days (as per the choice of client viz. Quarterly / Monthly) between two settlements of running account.
SEBI vide circular SEBI/HO/MIRSD/DOP/P/CIR/2021/57 dated 16th June 2021 has partially modified the above guidelines. Now it has been decided that the settlement of running account of funds of the client shall be done by the TM after considering the End of the day (EOD) obligation of funds as on the date of settlement across all the Exchanges, 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 on the day on which settlement of running account of funds is scheduled, a TM may retain funds to be calculated in the prescribed manner .
According to the revised guidelines, a 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. Journal entries in client account shall be permitted only for levy / reversal of charges in client’s account.
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 irrespective of the date when the running account was previously settled.
In cases where physical payment instrument (cheque or demand draft) is issued by the TM towards the settlement of running account due to failure of electronic payment instructions, the date of realization of physical instrument into client’s bank account shall be considered as settlement date and not the date of issue of physical instrument.
Further , the Authorized person shall not be permitted to accept client’s funds and securities. The TM should keep a proper check. Proprietary trading by Authorized person should be permitted only on his own funds and securities and not using any of the client’s fund.
As per revised guidelines, on settlement of the running account of funds of a client by TM, an intimation shall be sent to the client by SMS on mobile number and also by email. The intimation should also include details about the transfer of funds (in case of electronic transfer – transaction number and date; in case of physical payment instruments – instrument number and date). TM shall send the retention statement along with the statement of running accounts to the clients as per the existing provisions within 5 working days.
It has been provided that new guidelines shall be applicable from August 01, 2021 and the Stock Exchanges shall put in place an appropriate reporting requirement by TM to enforce the above system.
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