SEBI Running Account Settlement Deadlines and Guidelines

SEBI has outlined new guidelines on the settlement of running accounts having funds lying with Trading Members (Stock Broker).

These guidelines will come into effect from October 2022. It states that the client's funds in the running account will be settled by the trading member(TM) quarterly or monthly as per the eligibility or option availed by investors.

Investors have an option to choose their settlement cycle as monthly or quarterly. But if there are no active trades in the last 30 days, their funds will automatically be settled in the next three working days.

The settlement will be done post making an allowance for End of day (EOD) obligations on the settlement date, which will be on the first Friday of the quarter or month, depending on the investor's category.

Running Account settlement stands for payment of clear funds lying with the broker to be returned to investors.

Mentioned below are the instructions given to all Trading Members or Stock Brokers by SEBI:

·         Trading member has to settle the funds on Friday of the first week; if Friday is a non-working day, the same will be settled on the previous working day. The settlement amount has to be calculated post considerations of EOD obligations across all segments. The quarter is defined as, Apr-Jun, Jul Sep, Oct-Dec, Jan–Mar. This rule has to be followed for both the conditions that investors are falling into, viz 90days (quarterly settlement) and 30 days (monthly settlement).

·         An investor who has not traded in the last 30 days will be classified as an inactive account, and the fund has to be settled on monthly settlement or post 30 days, whichever is earlier within three working days.

·         An investor who is eligible for quarterly settlement and has taken a payout on Thursday but has again done a payin on Friday, still by default, will be in the cycle of quarterly settlement, and his account will be settled.

·         In the case of new clients, no settlement will be required on the first settlement date (quarterly or monthly as per the client's preference). However, the rule of inactive accounts has to be followed.

·         In case a client has an open position in derivatives, the last day of contract expiry or the date on which the position is closed will be treated as the last transaction date for calculating 30 calendar days for the running account settlement.

·         The funds that can be retained by a TM (trading Member); if a client has an open position on the first Friday of the month/quarter on which the running account is due for settlement under the following manner.

1.      Entire pay-in obligations of funds outstanding at EOD across all segments.

2.      TM may retain 50% of the margin requirement as cash margins, excluding the margin on MTM.

3.      TM may retain an additional 225% margin (which includes an extra 125% margin) reduced by 50% cash margin and the value of securities pledged. This margin obligation may also include the margin collected by TM as per their RMS policies; T-1 should be the trade rate considered for calculating margin or appropriate haircut.

·         Payment has to be made in electronic mode via NEFT, RTGS etc. TM will have to maintain the appropriate records in case of physical settlement.

·         All information about quarterly and monthly settlements will be sent to the registered mobile number and registered email ID within the next five days from settlement.

·         If TM receives cheques, but the status is unclear on the settlement day, these funds need not be settled.

SEBI stipulates these schedules to avert brokers' misappropriation of surplus cash. Disputes from the client's side should be brought to notice within 30 days from the settlement date.