In order to increase transparency, market regulator Securities and Exchange Board of India (SEBI) has asked stock brokers to tag all the untagged demat accounts by June-end.
In a circular issued on Monday, the market watchdog has directed the stock brokers to tag all the demat accounts in different categories. The above move is with a view to know for what purpose has a demat account been open by the stock brokers.
SEBI has given the brokers time till 30 June to implement the tagging of demat accounts.
If the accounts remain untagged from 1 July, any fresh buying from thse accounts will not be allowed.
However, the shares will get credited as a result of corporate action. The account holders whose accounts remain untagged will also not be able to sell the shares from their accounts.
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The exchanges and depositories will have to submit their compliance reports on 1 July and 1 August.
As per the SEBI norms, there are five types of demat accounts that are opened.
Sebi tightens rules on demat accounts.
- The proker will now have to categorise demat accounts and tell its purpose.
- The tagging of demat accounts must be completed by 30 June.
- Shares could not be added in untagged demat accounts from 1 July.
- No impact on addition of shares in connection with the corporate action.
- From 1 August, shares could not be sold from untagged accounts.
- Exchanges, and depositories must submit their compliance reports by 1 July and 1 August.
- Currently, demat accounts opened fall under 5 categories.
5 categories in which demat accounts are opened
– Proprietary Account – for self trading
– Pool Account – for settlements.
– Client unpaid securities – for client’s unpaid shares
– Client securities margin pledge – pledging client shares for margins
– Client securities under margin funding – funded securities for margin securities