Home / Business and Economy / SEBI Pledges Investor Protection: New Rules for Unpaid Shares
SEBI Pledges Investor Protection: New Rules for Unpaid Shares
3 Jul
Summary
- New rules mandate shares remain in client demat accounts with broker pledge.
- Brokers must notify clients of dues and potential sale via email/SMS.
- Automatic pledge release ensures investor rights if brokers delay action.
The Securities and Exchange Board of India (SEBI) has significantly updated regulations for shares that investors have purchased but not fully paid for. These unpaid securities will now be credited to the client's demat account and subsequently pledged to the broker until outstanding dues are settled.
Brokers are now obligated to notify their clients about any pending payment obligations and the possibility of their securities being sold. These notifications must be delivered via email or SMS. A transparent policy for handling these securities, including timelines for payment, must be maintained by stockbrokers, with a maximum payment period set at five trading days from the payout date.
To bolster investor protection, an automatic release mechanism is now in place. If a broker does not invoke or release the pledge within five trading days after the payout, depositories will automatically release it on the sixth trading day. Furthermore, SEBI has prohibited brokers from using these pledged securities to secure funding from financial institutions.
