Capital markets regulator Securities and Exchange Board of India (SEBI) on Monday said all demat accounts of stock brokers, which are not labeled, must be labeled appropriately by the end of June.
Securities credit will not be permitted on any demat account left untagged from July 1st. However, corporate actions credits will be permitted, SEBI said in a circular.
The labeling of bank and demat accounts reflects the purpose for which such bank or demat accounts are maintained and the reporting of such accounts to stock exchanges and depositories.
SEBI further said that the debiting of securities will also not be permitted in any demat account left untagged from August.
The stockbroker will need to obtain approval from the exchanges to allow the marking of such demat accounts from August 1 and, in turn, the exchanges must grant such approval within two business days after imposing a penalty in accordance with their internal policy.
“All untagged securities dealers’ dematerialized accounts must be properly labeled by June 30, 2022,” SEBI said.
The framework will not apply to demat accounts which are used exclusively for banking activities by securities dealers who are also banks.
Currently, securities dealers are only required to maintain demat accounts in five categories – Proprietary Account, Pool Account, Clients’ Outstanding Securities, Clients’ Securities Margin Pledge Account, and Clients’ Securities under the Margin Funding Account.
Under the rules, the designation of stockbroker demat proprietary accounts as “stockbroker – account owner” is voluntary and accounts that are not labeled would be deemed to be proprietary.