Sebi Eases Settlement Rules for Dormant Accounts to Streamline Processes and Protect Investors

The Securities and Exchange Board of India (Sebi) has relaxed rules for settling client funds in trading accounts inactive for 30 days. This change is effective immediately, aiming to simplify processes while protecting investors. Previously, brokers had to identify and settle these accounts daily within three days. Now, settlements will occur during the monthly cycle set by stock exchanges.

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These adjustments are part of Sebi's ongoing efforts to streamline operations for market participants. The revised guidelines mean that brokers no longer need to conduct daily checks on inactive accounts. Instead, funds will be settled according to the monthly running account settlement dates outlined in the exchanges' annual calendar.

Stock Brokers' New Settlement Guidelines

Sebi's circular highlights that the new framework replaces earlier requirements from August 2024. The changes were prompted by industry feedback pointing out inefficiencies in the previous daily settlement process for inactive accounts. This move is intended to ease business operations while ensuring investor protection.

If a client resumes trading after being inactive for 30 days but before the next monthly settlement date, brokers must settle according to the client's chosen quarterly or monthly preference. This ensures flexibility and convenience for active traders returning after a period of inactivity.

Implementation and Industry Response

The regulator has instructed stock exchanges to update their rules and communicate these changes widely. This directive aims to ensure that all market participants are aware of the new provisions and can adjust their practices accordingly.

Sebi's decision reflects its commitment to balancing ease of doing business with investor protection. By addressing industry concerns, the regulator aims to create a more efficient and responsive market environment.

The revised norms are expected to benefit both brokers and investors by reducing administrative burdens and aligning settlement processes with practical trading patterns. This approach underscores Sebi's focus on fostering a supportive regulatory framework for India's capital markets.