All demat accounts maintained by stockbrokers must be tagged by the end of June: SEBI

Securities and Exchange Board of India noted that corporate actions credits will be allowed

Securities and Exchange Board of India noted that corporate actions credits will be allowed

Capital markets regulator SEBI said on Monday that all securities brokers’ dematerialized accounts, which are not labeled, must be labeled appropriately by the end of June.

Securities credit will not be permitted on any demat account left untagged from July 1st. However, corporate actions credits will be permitted, the Securities and Exchange Board of India (SEBI) said in a circular.

The labeling of bank accounts and bank accounts reflects the purpose for which these bank/demat accounts are maintained and the reporting of these accounts to stock exchanges/deposits.

SEBI further said that the debiting of securities will also not be permitted in any demat account left untagged from August.

The stockbroker will need to obtain approval from the exchanges to allow the marking of such demat accounts from August 1 and, in turn, the exchanges must grant such approval within two business days after imposing a penalty in accordance with their internal policy.

“All stockbroker demat accounts that are not labeled must be properly labeled by June 30, 2022,” SEBI said.

The framework will not apply to demat accounts which are used exclusively for banking activities by securities dealers who are also banks.

Currently, securities dealers are only required to maintain deposit accounts in five categories: proprietary account, pool account, unpaid client securities, client securities margin pledge account, and clients under the margin funding account.

Under the rules, the designation of stockbroker demat proprietary accounts as “stockbroker – account owner” is voluntary and accounts that are not labeled would be deemed to be proprietary.

Dolores W. Simon