Representation were received from industry associations citing operational difficulties in implementation of framework requiring Stock Brokers / Clearing Members to upstream clients funds to Clearing Corporation. Accordingly after recommendation of Industry Standard Forum, SEBI have issued revised framework for the same.

Principally Stockr Broler/Clearing Member shall upstream all the clients’ clear credit balances to Clearing Corporation on End of Day (EOD) basis. Such upstreaming shall be done only in the form of either cash, lien on Fixed Deposit Receipts (FDRs) created out of clients’ funds, or pledge of units of Mutual Fund Overnight Schemes (MFOS) created out of clients’ fund.

SEBI in this circular have also issued framework with respect to

1. receipt/payment of funds by SBs and CMs from/to their clients

2. Upstreaming via FDRs created out of clients’ funds

3. Upstreaming via pledge of units of Mutual Fund Overnight Schemes (MFOS

4. Eligibility of bank instruments as collateral

SEBI has specified following guidelines for holding investments in dematerialised form by AIF:-

1. Any investment made by an AIF on or after October 01, 2024 shall be held in dematerialised form only, irrespective of whether the investment is made directly in the investee company or is acquired from another entity.

2. The investments made by an AIF prior to October 01, 2024 are exempted from the requirement of being held in dematerialised form, except in the following cases.

   1. Investee company of the AIF has been mandated under applicable law to facilitate dematerialisation of its securities

   2. The AIF, on its own, or along with other SEBI registered intermediaries/entities which are mandated to hold their investments in dematerialised form, exercises control over the investee company

3. The investments made by an AIF prior to October 01, 2024 which are covered under conditions as specified above

Para’s shall be held in dematerialised form by the AIF on or before January 31, 2025.

SEBI has specified following guidelines for appointment of custodian by AIF:-

1. The custodian for a scheme of an AIF shall be appointed prior to the date of first investment of the scheme

2. Existing schemes of Category I and II AIFs having corpus less than or equal to INR 500 crore and holding at least one investment as on date of this circular shall appoint custodian on or before January 31, 2025.

SEBI vide circular dated 5th January 2024 has issued framework for short selling as under :-

1. “Short selling” shall be defined as selling a stock which the seller does not own at the time of trade

2. All classes of investors, viz., retail and institutional investors, shall be permitted to short sell

3. Naked short selling shall not be permitted in the Indian securities market and accordingly, all investors would be required to mandatorily honor their obligation of delivering the securities at the time of settlement

4. No institutional investor shall be allowed to do day trading i.e., square off their transactions intra-day. In other words, all transactions would be grossed for institutional investors at the custodians’ level and the institutions would be required to fulfill their obligations on a gross basis. The custodians, however, would continue to settle their deliveries on a net basis with the stock exchanges

5. The stock exchanges shall frame necessary uniform deterrent provisions and take appropriate action against the brokers for failure to deliver securities at the time of settlement which shall act as a sufficient deterrent against failure to deliver.

6. A scheme for Securities Lending and Borrowing (SLB) shall be put in place to provide the necessary impetus to short sell. The introduction of a full-fledged securities lending and borrowing scheme shall be simultaneous with the introduction of short selling by institutional investors.

7. The securities traded in F&O segment shall be eligible for short selling. SEBI may review the list of stocks that are eligible for short selling transactions from time to time.

8. The institutional investors shall disclose upfront at the time of placement of order whether the transaction is a short sale. However, retail investors would be permitted to make a similar disclosure by the end of the trading hours on the transaction day

9. The brokers shall be mandated to collect the details on scrip-wise short sell positions, collate the data and upload it to the stock exchanges before the commencement of trading on the following trading day. The stock exchanges shall then consolidate such information and disseminate the same on their websites for the in formation of the public on a weekly basis.

In response to the evolving landscape of online trading, the stock broking industry in India is taking a significant step to enhance investor security and streamline the investment process. Currently, investors may encounter suspicious activities in their trading accounts without the ability to voluntarily freeze or block them. Recognizing this gap, SEBI vide circular dated 12th January 2024 have decided on framework for Trading Members to provide facility of voluntary freezing / blocking the online access of the trading account to their clients.

A detailed policy for voluntary freezing / blocking the online access of the trading account of the client shall be laid by the Industry Standard Forums in consultation with SEBI which shall include the following :-

1. modes through which a client can request/communicate to the Trading Member for voluntarily blocking the trading accounts;

2. issuing of acknowledgement to the clients on receipt of message;

3. time period within which the request shall be processed and the trading account shall be frozen/blocked.

4. Action to be taken by the Trading Member pursuant to the receipt of request for freezing/blocking of the trading account.

5. Process for re-enabling the client for trading/transfers.

6. Intimation to be provided by the trading member to the clients w.r.t. introduction of the facility to block the trading accounts.