Market regulator Security Exchange Board of India’s SEBI) new guidelines for settlement of running accounts will come into effect from October 1. The new guidelines mandate brokers to settle funds of clients’ lying in running accounts.
Market regulator Security Exchange Board of India’s SEBI) new guidelines for settlement of running accounts will come into effect from October 1. The new guidelines mandate brokers to settle funds of clients’ lying in running accounts. As per the guidelines, brokers will have to do settlement of funds every month on the first Friday or every three months on the first Friday. In other words, brokers will have to reverse the unutilised funds lying idle in the clients’ accounts at least once in a month or 3 months.
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Accordingly, the first settlement date for the brokers will be on October 7, 2022. If the first Friday is a holiday, then the settlement will take place on the previous trading day.
Zee Business correspondent Brijesh Kumar said that SEBI has introduced new guidelines in the interest of the clients. The clients will get money back on time and the brokers cannot misuse the excess amount.
What Is Running Account Settlement
The process of transferring back the unused funds of the clients to their accounts by stock brokers is called running account settlement.
The regular settlement of accounts, according to SEBI’s new guidelines, will help reduce the misunderstanding between the client and broker as their accounts will be cleared. The SEBI while drafting the guidelines had pointed out that if there is an excess amount in an account, why cannot it be settled by the brokers
The SEBI guidelines state that the brokers can keep only a 225 per cent margin and pay in, and other excess amounts have to be credited to the client’s account.
However, brokers have shown scepticism.
1. There are three different markets– equity, currency and commodity which close at different hours. How will all three be settled in a day?
2. Client’s money (not of broker’s) which is in the clearing and not with the broker, why should that be settled?
3. In a case where the money is settled and the client wants a deal on the coming Monday, and there occurs an issue with the transaction, the client could be penalised or could miss the trade opportunity.
4. Many clients keep their money with brokers as a Fixed Deposit (FD). Withdrawing that FD just for settlement and creating a fresh FD will make the process lengthy and also their return will be affected.
5. If all the accounts are settled on Friday, there could be an impact on the liquidity.
