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SEBI tightens norms for brokers' pool accounts

Our Bureau

MUMBAI, Jan. 23

IN a bid to completely phase out the balances in the brokers' pool account, the Securities and Exchange Board of India (SEBI) today announced a three-pronged measure to ensure that settlement is made directly to investors.

This decision follows a meeting of the sub-group constituted under Prof J.R. Verma, member, SEBI. ``These measures will leave no room for any irregular balances,'' Prof Verma said.

Hence, from February 12, clearing members (CM) will be required to transfer the securities from their respective pool account to the respective beneficiary account of their clients within six calendar days after pay-out instead of the existing limit of 1 5 days.

Any balances lying in the pool account beyond the stipulated deadline will not be eligible for delivery in the subsequent settlements or for pledging or stock lending.

The capital market regulator also said it would also attract a penalty of six basis points per week on the value of the securities lying in the clearing member pool account. The money collected would be earmarked by the depository for defraying the expen ses in connection with investor education and awareness.

Initially, the securities lying in these accounts beyond the specified time period, are to be identified based on `first-in first out' (FIFO) basis.

However with effect from March 5, securities will be identified based on the settlement number.

The clearing corporation/house shall provide the settlement-wise details of securities to the depositories and the depositories shall maintain the settlement-wise records for the purpose.

From April 2, securities in the pay-out shall not be credited to the CM pool account except in exceptional circumstances.

Furthermore, the time limit of six calendar days after pay-out will be reduced further to four calendar days or two working days, whichever is later. The penalty will continue to be applicable on the balances lying in the pool account after this period.

The above measures will not be applied to securities lying in the CM pool account maintained with clearing corporation/house for the purpose of vyaj badla and/or ALBM transactions.

SEBI had early this year summoned brokers with large balances in their pool accounts in a bid to identify the reason behind their inability to bring their balances to zero.

A pool account is a demat account. All sales made by clients are received in the pool account for delivery to the clearing house and all purchases made by clients are received from the clearing house for delivery to clients. In other words, it serves as a central account for brokers to facilitate purchases and sales by clients.

Related links:
Bid to tackle misuse of pool account -- SEBI proposes direct settlement to investor

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