SEBI – Refund of Security Deposit by Trading Members: Key Highlights

market inflation
  • Overview

Securities and Exchange Board of India (SEBI) vide notification / Circular No. SEBI/HO/MIRSD/FCR/CIR/P/2021/01 issued and publishes dated 06th January, 2021, has published “Refund of Security Deposit Section 11 (1) of the Securities and Exchange Board of India Act, 1992 read with Section 10 of the Securities Contract (Regulation) Act, 1956.

  • The Circular is issued to :
    • The Managing Director/Executive Director,
    • All Stock Exchanges
  • Aim and vision of this circular:

to protect the interests of investors in securities, to promote the development of, and to regulate the securities market

  • Previous Reference:

This is with reference to the letter MRD/DSA/OW/14347/4/2019 dated June 10, 2019 issued to NSE regarding refund of security deposit and arbitration mechanism after the surrender of membership of Trading Members.

  • Provisions of this Circular

A. SEBI has advised the followings to all exchanges regarding refund of security deposit on surrender of membership by Trading Members:

1. On approval of application for surrender of Trading Member’s registration by SEBI, the Exchange shall release Security Deposit of the Trading Member (engaged in trading on behalf of clients) after the period mentioned at point a) or b), whichever is earlier:

Point APoint B
Three years from the date of receipt of surrender application by Exchange from the Trading Member (in order to meet any investor claims), orFive years from the date of disablement of Trading Member’s trading terminals by the Exchange

B. On approval of application for surrender of Trading Member’s registration by SEBI, the Exchange shall release Security Deposit of the Trading Member (engaged only in proprietary trading in last three years prior to the date of application) after the period mentioned at point a) or b), whichever is earlier:

Point APoint B
one year from the date of receipt of surrender application by exchange from the Trading Member, orthree years from the date of disablement of Trading Member’s trading terminals by the Exchange.

B. The stock exchanges are advised to

  • make necessary amendments to the relevant bye-laws, rules and regulations for the implementation of the above decision immediately;
  • bring the provisions of this circular to the notice of the members of the stock exchange and also to disseminate the same through their website; and
  • communicate to SEBI, the status of implementation of the provisions of this circular in the Monthly Development Reports to SEBI.

Link: www.sebi.gov.in/legal/circulars/jan-2021

Disclaimer: Every effort has been made to avoid errors or omissions in this material. In spite of this, errors may creep in. Any mistake, error or discrepancy noted may be brought to our notice which shall be taken care of in the next edition. In no event the author shall be liable for any direct, indirect, special or incidental damage resulting from or arising out of or in connection with the use of this information.

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