TMI BlogUpstreaming of clients’ funds by Stock Brokers (SBs) / Clearing Members (CMs) to Clearing Corporations (CCs)X X X X Extracts X X X X X X X X Extracts X X X X ..... SD/MIRSD-PoD-1/P/CIR/2023/084 dated June 08, 2023 , and vide circular no. SEBI/HO/MIRSD/MIRSD-PoD-1/P/CIR/2023/110 dated June 30, 2023 (collectively hereinafter referred to as June Circulars ), had specified the framework requiring SB/CMs to upstream (i.e. placed with) clients funds to CCs. 2. Representations have been received from various stakeholders viz. stock brokers, and Brokers associations citing certain operational difficulties in implementation. In order to address the issue, SEBI advised the industry associations to consult with MIIs under the aegis of Broker s Industry Standards Forum (ISF) and submit a proposal to SEBI so that the principle of upstreaming is complied with and operational difficulties are suitably addres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roprietary funds from/to stock brokers. III. Payment to Clients : The clients may request SBs/CMs to release funds at any time during the day. The processing of such release requests shall be as per respective risk management practices of SB/CMs. All payment requests of the client received on a day shall be processed on or before the next settlement day. In cases, where the payment request is not processed on the same day, SB/CMs need to ensure that the funds of the client are placed with CC in terms of this circular. B. Upstreaming via FDRs created out of clients funds: I. FDRs created out of clients funds by SBs/CMs shall satisfy the following conditions: a. The FDR shall be created only with banks which satisfy the CC s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are invested only in such MFOS that deploy funds into risk-free government bond overnight repo markets and overnight Tri-party Repo Dealing and Settlement (TREPS). Such MFOS units should be in dematerialized (demat) form, and must necessarily be pledged with a CC at all times. III. SBs/CMs shall maintain a dedicated demat account (hereinafter referred to as Client Nodal MFOS Account ) for subscription/ redemption of MFOS units. The depositories shall allow subscription/redemption transactions only in the said account. IV. From Client Nodal MFOS Account , SBs/CMs shall provide MFOS units as collateral to the CC. While providing the units as collateral, SBs/CMs shall identify the end clients. In order to implement the same, a pledge s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... odity derivatives market, it has been decided to allow Bank guarantees provided only by non-individual clients, based on certain terms and conditions. Such clients shall provide a declaration and underwriting that they shall have no recourse to SEBI or exchanges in case of wrongful invocation of such BGs by SB/CM. These BGs shall bear a condition that on invocation, the moneys shall be credited only to the (USCNBA) account and thereafter upstreamed to the CC. The other terms and conditions are mentioned in the Annexure A . The CCs are at liberty to apply stricter conditions other than those specified based on their risk assessment. 9. The cut-off times for upstreaming of clear credit balance of clients shall be determined by the CCs in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their monthly development report. 14. This circular is issued in exercise of powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992 read with Regulation 30 of SEBI (Stock Brokers) Regulations, 1992 and Regulation 51 of Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018 , to protect the interests of investors in securities and to promote the development of, and to regulate the securities markets. Yours faithfully, Aradhana Verma General Manager Tel.No: 022 26449633 aradhanad@sebi.gov.in Annexure A Eligible clients: 1. Only non-individual clients shall be allowed to give BGs as margins, specifical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent with the said trading member. b. We declare that we clearly understand that in case trading member wrongly invokes the BG, we shall not have any recourse to Exchange or SEBI to the extent of BG amount and shall not be compensated in any manner from Investor Protection Fund. Other conditions 9. SB/CM shall put its own funds with CC to the extent of BG amount towards the margin requirements of these clients. 10. SB/CM cannot use borrowed funds for this purpose. Trading member shall give auditors certificate on half yearly basis to CC in this regard. As mentioned in para 5 of the circular, the CCs are at liberty to apply stricter conditions other than those specified above based on their risk assessment. - Circular - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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