SEBI Allows Shares In Depository Account To Be Used As Margin Till 31 Aug

On Monday, SEBI (Securities and Exchange Board of India) said that shares in a depository that may be pledged or repledged can be used as margin for another three months till 31 August in the wake of coronavirus pandemic.

The markets regulator in February came out with a framework on margin obligation to be given by way of pledged or repledged shares in the depository system.

Under the framework, trading or clearing member need to accept collateral from clients in the form of securities, only by way of ''margin pledge'', created in the depository system with effect from 1 June. The guidelines have been extended by three months for implementation of the framework, SEBI said in a circular.

In view of the situation arising due to COVID-19 pandemic, lockdown imposed by the government, representations received from the depositories and the clearing corporations and that the changes to the systems and software development still under progress, it has been decided to extend the implementation of the framework to August, 2020," it said.

"Accordingly... the trading member (TM) / clearing member (CM) shall be required to close all existing demat accounts tagged as 'Client Margin / Collateral' by August 31, 2020," SEBI said.

However, the provision regarding holding of Power of Attorney by TM or CM not to be considered as equivalent to the collection of margin by such member in respect of securities held in the demat account of the client will be applicable from 1 June.

With regard to confirmation from the client or pledgor through one-time password (OTP) on the mobile number or registered e-mail ID or another verifiable mechanism, SEBI said that such confirmation needs to be required only once from the client at the time of initial creation of pledge in favour of trading or clearing member and subsequent repledging by such member need not require any further confirmation from the client.