Stock brokers may open appropriate no. of current accounts in multiple banks – SEBI

Maintenance of current accounts in multiple banks by Stock Brokers

Stock brokers may open appropriate no. of current accounts in multiple banks – SEBI

SEBI vide circular no. SMD/SED/CIR/93/23321dated November 18, 1993 on “Regulation of Transactions between Clients and Brokers” mandated that all the stock brokers shall keep the money of the clients in a separate account and their own money in a separate account.

Further, SEBI vide circular no. SEBI/HO/MIRSD/MIRSD2/CIR/P/2016/95 dated September 26, 2016 on “Enhanced Supervision of Stock Broker/Depository Participants” and CIR/HO/MIRSD/MIRSD2/CIR/P/2017/64 dated June 22, 2017 on “Clarification to Enhanced Supervision Circular” provided guidelines on uniform nomenclature to be followed by Stock Brokers for naming and tagging of bank accounts.

According to the guidelines, Bank account(s) which hold clients funds shall be named as “Name of Stock Broker -Client Account”, Bank account(s) held for the purpose of settlement would be named as “Name of Stock Broker -Settlement Account” and that naming of proprietary bank account is voluntary and all accounts which are not named as Client/Settlement account would be deemed to be proprietary accounts.

Reserve Bank of India (RBI) has issued a circular no. DOR.No.BP.BC/7/21.04.048/2020-21 dated August 06, 2020 according to which banks shall not open current accounts for customers who have availed credit facilities in the form of cash credit (CC)/ overdraft (OD) from the banking system and all transactions shall be routed through the CC/OD account.

However, on a review, RBI vide circular no. DOR.No.BP.BC.30/21.04.048/2020-21 dated December 14, 2020 has permitted banks to open specific accounts which are stipulated under various statutes and instruction of other regulators/regulatory departments, without any restrictions placed in terms of the RBI circular dated August 06, 2020.

SEBI has clarified that Stock Brokers should maintain current accounts in appropriate number of banks (subject to the maximum limit prescribed by Stock Exchanges/SEBI from time to time) for holding the client funds (i.e., Client Account),for settlement purposes (i.e., Settlement Account)and any other accounts mandated by Stock Exchanges such as Exchange Dues Account subject to the condition that brokers are using these accounts for their defined purposes.

Circular No. SEBI/HO/MIRSD/DOP/P/CIR/2021/653 Click Here >>

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