CIRCULAR
SEBI/HO/MIRSD/DPIEA/P/CIR/2022/72 May 27, 2022
To,
All Recognised Stock Exchanges
All Recognised Clearing Corporations
All Depositories
Dear Sir/Madam,
Subject: Modification to Standard Operating Procedure in the cases of Trading
Member / Clearing Member leading to default
1. SEBI vide circular no. SEBI/HO/MIRSD/DPIEA/CIR/P/2020/115 dated July 1, 2020
had specified the Standard Operating Procedure enumerating the steps to be taken
by the Stock Exchanges (“SEs”), Clearing Corporations (“CCs”) and Depositories
in cases where SE / CC is of the view that Trading Member / Clearing Member is
likely to default in repayment of funds or securities to its clients.
2. SEBI, in consultation with the Market Infrastructure Institutions, has decided to
modify clause 4.25 of SEBI circular no. SEBI/HO/MIRSD/DPIEA/CIR/P/2020/115
dated July 1, 2020 in order to provide equitable distribution of funds amongst
investors. Accordingly, clause 4.25 of the said circular stands modified as under:
Page 1 of 3
Sr. No. Action Timeline
4.25 ISE / SEs / CCs shall endeavour to settle the claims of Within 30
maximum number of clients by way of interim trading days
from
measures, under their supervision prior to issuing
crystallization
show cause notice (SCN) for declaring the TM a
of balances
defaulter. The TM shall be instructed to pay small
investors out of available funds and own resources
(movable and immovable) under the supervision of the
ISE/ SEs.
Further, the unencumbered deposits available with the
SEs/ CCs, after adjusting for any dues of the SE / CC
and maintaining the minimum BMC, shall also be
utilised for settling the credit balance of investors
starting from the smallest amount. Such amount shall
be paid in full to all such investors having credit
balance up to the amount of Rs. 25,00,000/- (Rupees
twenty five lakh), subject to availability of funds.
Further, investors having credit balance of more than
Rs. 25,00,000/- (Rupees twenty five lakh) shall be paid
on pro-rata basis from the remaining funds.
Also, any surplus available with any SEs / CCs shall
be utilised for settling the credit balances of clients with
respect to other SEs. BGs of the TM shall be invoked
and also the FDRs shall be encashed for utilisation.
SEs / CC may settle such clients in tranches.For this
purpose, the balances of client will be netted across
exchanges to arrive at the final credit balance due to
such client.
The TM shall furnish the proof of payment to the
clients, to the SEs.
In this regard, the related parties of the TM shall not be
considered for settlement, for which the TM shall
provide an undertaking to the SEs/ CC. TM shall
provide indemnity to the SEs to make available the
funds to meet any shortfall in meeting investor’s claim
(other than those who have withdrawn their claim).
Clients withdrawing their claim will have to submit
unconditional withdrawal letter to the SEs.
Page 2 of 3
3. All other provisions specified in SEBI circular dated July 1, 2020 shall continue to
remain applicable.
4. Stock Exchanges, Clearing Corporations and Depositories are directed to:
4.1. bring the provisions of this Circular to the notice of their members /
participants and also disseminate the same on their websites.
4.2. make amendments to the relevant Bye-laws, Rules and Regulations, as may
be necessary; and
4.3. communicate the status of the implementation of the provisions of this
Circular in their monthly development report to SEBI.
5. This Circular shall be applicable with immediate effect.
6. This Circular is issued in exercise of the powers conferred under Section 11(1) of
the Securities and Exchange Board of India Act, 1992 read with section 10 of the
Securities Contract (Regulation) Act, 1956 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.
7. This Circular is issued with the approval of competent authority.
8. This Circular is available at www.sebi.gov.in under the link “LegalCirculars”
Yours faithfully
Rachna Anand
General Manager
Tel. No: 022 26449582
rachnaa@sebi.gov.in
Page 3 of 3