CIRCULAR
SEBI/HO/MIRSD/DoP/P/CIR/2022/119 September 19, 2022
To,
All Depositories
All recognized Stock Exchanges and Clearing Corporations
Madam / Sir,
Sub: Validation of Instructions for Pay-In of Securities from Client demat
account to Trading Member (TM) Pool Account against obligations
received from the Clearing Corporations
1. In order to protect clients’ funds and securities and to ensure that the Stock Broker
segregates securities or moneys of the client or clients and does not use the
securities or moneys of a client or clients for self or for any other client, SEBI has
issued various circulars from time to time.
2. Further, SEBI circular no. SEBI/HO/MIRSD/DOP/P/CIR/2021/595 dated July 16,
2021, inter-alia, specifies that “Depositories may keep block on the securities in
client’s demat account in respect of Intra or Inter depository transfer instruction till
pay-in day. The blocked securities will be transferred only after checking against
the client level net delivery obligation received from CCs.” SEBI circular no.
SEBI/HO/MIRSD/DOP/P/CIR/2022/109 dated August 18, 2022 made the
aforementioned facility of block mechanism mandatory for all Early Pay-In
transactions.
3. SEBI had extensive consultations with Exchanges, Depositories and Clearing
Corporations (CCs) to further mitigate the risk for clients’ securities, particularly
those given towards delivery/settlement obligations. Accordingly, the following is
decided:
3.1. Depositories, prior to executing actual transfer of the securities for Pay-In from
client demat account to TM Pool account, shall validate the transfer instruction
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received through any of the available channels for the purpose of Pay-in, i.e.
either initiated by clients themselves or by the Power of Attorney (POA) /
Demat Debit and Pledge Instruction (DDPI) holder against the client-wise net
delivery obligation received from CCs.
3.2. For Early Pay-In transactions, the existing facility of Block mechanism shall
continue.
4. In order to validate the Pay-In Instructions, the following process shall be put in
place by the Depositories:
Validation of transfer instruction details with CC obligation details
4.1. Depositories receive the debit instruction for the purpose of Pay-In, given either
by client himself using depository’s online system or eDIS mandate or through
depository participant based on physical DIS / digitally signed DIS given by
client or POA / DDPI holder.
4.2. CCs shall provide client-wise net delivery obligations on T day to the
depositories.
4.3. Based on the obligation data provided by CCs, Depositories shall validate the
depository transfer instruction details with CC obligation details based on UCC,
TM ID, CM ID, Exchange ID, ISIN, quantity, settlement details etc.
Matched instruction:
4.4. In case of matching of all details like UCC, TM ID, CM ID, ISIN, quantity,
settlement details etc. of the transfer instruction with the obligation data, the
instruction shall be carried out by the Depositories and such securities will be
debited from client’s demat account and credited to linked TM Pool account on
or before the settlement day.
Unmatched instruction:
4.5. In case of discrepancies in details like UCC, TM ID, CM ID, ISIN etc., between
instruction and obligation, such transfer instructions will be rejected by the
depositories.
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4.6. In case of discrepancies in quantity of securities between instruction and
obligation, the following shall be noted:
4.6.1. If the quantity in instruction is less than the obligation provided by CC,
then the instruction will be carried out by the depositories.
4.6.2. If the quantity in instruction is more than the obligation provided by CC,
then the instruction will be partially processed by the depositories (i.e.,
upto the matching obligation quantity).
Trades Confirmed by Custodians:
4.7. This process shall not be applicable to clients having arrangements with
custodians registered with SEBI for clearing and settlement of trades.
5. Depositories and CCs shall put in place appropriate systems to ensure compliance
of the provisions of this circular.
6. This circular shall be applicable with effect from November 25, 2022.
7. Stock Exchanges and Depositories are directed to:
7.1. bring the provisions of this circular to the notice of their members / participants
and also disseminate the same on their websites;
7.2. make necessary amendments to the relevant Bye-laws, Rules and Regulations
for the implementation of the above decision.
7.3. communicate to SEBI, the status of the implementation of the provisions of this
circular on November 30, 2022 and in their Monthly Development Reports.
8. This circular is issued in exercise of powers conferred under Section 11(1) of the
Securities and Exchange Board of India Act, 1992, and Section 19 of the
Depositories Act, 1996 to protect the interests of investors in securities and to
promote the development of, and to regulate the securities markets.
Yours faithfully
Aradhana Verma
Deputy General Manager
Tel. No: 022 26449633
aradhanad@sebi.gov.in
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