CIRCULAR
SEBI/HO/MIRSD/MIRSD-PoD-1/P/CIR/2023/110 June 30, 2023
To,
Stock Brokers through recognized Stock Exchanges
Depository Participants through recognized Depositories
Clearing Members through recognized Clearing Corporations
Dear Sir/Madam,
Subject: Implementation of circular on upstreaming of clients’ funds by Stock
Brokers (SBs) / Clearing Members (CMs) to Clearing Corporations (CCs)
1. SEBI, vide circular no. SEBI/HO/MIRSD/MIRSD-PoD-1/P/CIR/2023/084 dated June
08, 2023 (herein after referred to as “circular”), has specified the framework for
upstreaming of clients’ funds by SBs/CMs to CCs, which inter-alia states the following:
“As per the framework, no clients’ funds shall be retained by SBs/ CMs on End of Day
(EoD) basis. The clients’ funds shall all be upstreamed by SB/ CMs to CCs only in
the form of either cash, lien on FDR (subject to certain conditions enumerated below),
or pledge of units of Mutual Fund Overnight Schemes (MFOS).”
2. Representations have been received from various stakeholders viz. MIIs, stock
brokers, and associations that the changes to the systems are still under progress,
and that there are certain practical difficulties in implementation of the proposal
framework, including around opening of bank accounts. In view of the same, while the
SBs/CMs shall adhere to the basic requirement of upstreaming of clients’ funds to
CCs, as stated in clause 1 above, the provisions of the circular stand modified as
under:
2.1. Clause 3.C.V of the circular may be read as follows:
“SBs/CMs may receive funds from clients beyond the prescribed cutoff time for
upstreaming subject to the condition that there shall not be any further movement
of funds from that account (i.e., a debit freeze) till the opening of upstreaming
window on the next day.
Further, stock exchanges shall ensure that such funds remaining in bank accounts
of SB/CM are minimal and are for legitimate purposes.”
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2.2. Clause 3.A.I.d of the circular may be read as follows:
“The tenor of such FDRs shall not be more than one year and one day; and the
FDRs should be pre-terminable on demand.”
2.3. It is clarified that existing FDRs (created out of clients’ funds and having tenor of
more than one-year) created prior to issuance of the circular shall be allowed to
be grandfathered till maturity. Such FDRs at the time of renewal shall meet the
conditions specified at clause 3.A.I of the circular.
2.4. The provisions of the circular stated at clause 3.C.II, 3.C.III, 3.C.V, 3.C.IX, 3.C.XI
shall come into effect from September 01, 2023.
3. Stock exchanges, Clearing Corporations and Depositories are directed to bring the
provisions of this circular to the notice of their members/participants and also
disseminate the same on their websites.
4. This circular is issued in exercise of powers conferred under Section 11(1) of the
Securities and Exchange Board of India Act, 1992, to protect the interests of investors
in securities and to promote the development of, and to regulate the securities
markets.
Yours faithfully,
Bithin Mahanta
General Manager
Tel.No: 022 26449634
bithinm@sebi.gov.in
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