Haven't traded in 30 days? SEBI proposes new rules for your unused funds

To facilitate ease of doing business, market regulator Sebi on Thursday proposed easing the rules governing the settlement of funds belonging to clients who have not traded for 30 days.

In a draft circular released for public comments, Sebi suggested aligning the settlement process with the monthly running account settlement cycle announced by stock exchanges, replacing the current mandate that requires trading members to settle accounts within three working days after the 30-day period of inactivity.

Under the proposed framework, trading members will return the credit balances of inactive clients on the stipulated monthly settlement dates, as per the annual calendars of exchanges.

"It is being proposed that the funds of such clients who have not traded in the last 30 calendar days shall be settled on the upcoming settlement dates of monthly running account settlement cycle as notified by exchanges in the annual calendar issued by them from time to time," Sebi said.

Sebi noted that the proposed changes would facilitate ease of doing business without compromising on the safeguards for investors.

Currently, if you have an account with a broker and haven’t traded in the past 30 days, your broker must send any money you have in your account back to you within three working days. The existing rule is meant to protect investors and ensure their money isn’t misused.

But Brokers' Industry Standards Forum (ISF) complained that this system creates a lot of unnecessary work. They have to check daily to see which clients haven’t traded, even though the risk of misuse is low because client money is already kept safe with a clearing corporation.

“For the clients having credit balance, who have not done any transaction in the 30 calendar days since the last transactionand any amount of such client’s funds is lying with member for more than such 30 calendar days, the entire credit balance of client shall be returned to the client by TM, on the upcoming settlement dates of monthly running account settlement cycle (irrespective of settlement cycle preferred by the client) as stipulated by stock exchanges),” the draft circular to stock exchanges read.

"However, if the client trades after 30 calendar days and beforeaforesaid upcoming settlement dates of monthly running account settlement cycle, the settlement of account of client shall continue to be done by the Trading member as per the preference of quarterly/monthly as indicated by theclientfor running account settlement,” it added.

The Securities and Exchange Board of India (Sebi) has sought public comments on the proposal till December 26.