CIRCULAR
SEBI/HO/MIRSD/MIRSD-PoD1/P/CIR/2023/197 December 28, 2023
To,
All recognized Stock Exchanges
Dear Sir/Madam,
Subject: Settlement of Running Account of Client’s Funds lying with Trading
Member (TM)
1. In order to safeguard the interests of investors, SEBI in 2018 had mandated
settlement of running account of client’s funds on first Friday of the quarter/month.
This has been incorporated as clause 47 of “Master Circular on Stock Brokers”
issued on May 17, 2023.
2. Broker’s Industry Standards Forum (ISF) had represented various problems faced
by brokers due to single day of settlement viz. hectic activities on the day of
settlement leading to chances of errors, missing out on payment timings of banks
due to late finalization, delayed instructions, etc. They have recommended that
TMs may be allowed to settle the running account of clients on Friday and/or
Saturday to address these operational difficulties.
3. After due consideration, SEBI has decided to accept the recommendation to settle
the running account of clients on Friday and/or Saturday, which streamlines the
process of settlement and ensures ease of doing business for various stakeholders
viz. stock brokers and banks, while at the same time safeguarding the interests of
the investors by ensuring error free settlement. In view of this the following changes
are made in the Master circular dated May 17, 2023 :
3.1. Clause 47.1.1 stands modified as follows:
“47.1.1 The TM, after considering the End of the Day (EOD) obligation of funds
across all the Exchanges, shall settle the running accounts at the
Page 1 of 3
choice of the clients on quarterly and monthly basis, on the dates
stipulated by the Stock Exchanges.”
3.2. To ensure uniformity and clarity on dates of such monthly and quarterly
settlement of client accounts, clause 47.1.2 is modified as follows:
“47.1.2 Stock exchanges shall, jointly, issue the annual calendar for the
settlement of running account (quarterly and monthly) at the beginning
of the financial year.”
3.3. Further, to safeguard against any possibility of misuse of one client’s funds to
settle another clients’ running account, it is stipulated that any funds received
from clients shall remain in the upstreaming account. To incorporate this
safeguard, clause 47.1.3 is inserted as follows:
“47.1.3 TM shall ensure that funds, if any, received from clients, whose running
account has been settled, remain in the “Up Streaming Client Nodal
Bank Account” and no such funds shall be used for settlement of
running account of other clients. Stock Exchanges shall evolve a
monitoring mechanism for this purpose.”
4. The provisions of this circular shall be applicable with effect from the quarterly
settlement of Jan-Mar 2024 and monthly settlement of January 2024.
5. All other provisions under Clause 47 of the circular dated May 17, 2023 shall
continue to remain applicable.
6. Stock Exchanges shall:
6.1. bring the provisions of this Circular to the notice of their members and also
disseminate the same on their websites;
6.2. make amendments to the relevant Bye-laws, Rules and Regulations ,as may
be necessary;
6.3. issue the calendar for settlement of the client accounts for the financial year
Page 2 of 3
6.4. issue operational guidelines to their members in this regard;
6.5. continue online monitoring of timely settlement of running account for funds of
client and to verify that excess clients’ funds are not retained by the TM as on
the date of settlement of running account;
6.6. put in place an appropriate reporting requirement by TM to enforce the above
system; and
6.7. communicate the status of the implementation of the provisions of this Circular
in their monthly development report to SEBI.
7. 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
Amrita Shukla
Deputy General Manager
Tel. No: 022 26449882
amrita@sebi.gov.in
Page 3 of 3