SEBI Proposes Changes To Settlement of Funds For Inactive Trading Accounts

The Securities and Exchange Board of India on Thursday released a draft circular that proposes a revision in the rules related to the settlement of funds in accounts of clients who have been inactive for the past 30 days. 

Under current regulations, brokers are required to settle the accounts of inactive clients within three working days. Now, SEBI has proposed that brokers should settle the funds of inactive clients on the next scheduled monthly settlement date, as outlined in the exchanges' annual settlement calendar.

This new system would eliminate the need for daily settlements, while still ensuring that client funds are protected. 

The proposed revision comes after industry representatives, including the Brokers’ Industry Standards Forum, raised concerns about the requirement to identify inactive clients on a daily basis, which can lead to operational burdens.

As per the new rules that SEBI has proposed, if a client makes a trade before the scheduled settlement date, the settlement would follow the client's chosen settlement cycle, such as monthly or quarterly.

The market regulator has invited public comments in response to its circular till Dec. 26, 2024, allowing stakeholders to provide feedback on the new approach.

This move is part of SEBI’s ongoing efforts to ease the operational burden on brokers while ensuring the protection of investors’ interests, the circular stated.