Sebi moves to safeguard demat accounts through block mechanism

Sebi, in a circular on Friday, said that the decision was taken "considering the benefits of block mechanism"

Sebi
Following the Karvy scandal in 2019, Sebi had announced a slew of measures to prevent misuse of client securities by brokers.
BS Reporter
1 min read Last Updated : Aug 19 2022 | 11:23 PM IST
Market regulator, Securities and Exchange Board of India (Sebi), has announced fresh steps to safeguard investors’ demat accounts. The regulator has said that the so-called block mechanism will become mandatory for all early pay-in transactions with effect from November 14. The early pay of securities is used by traders to reduce their margin obligations.

Presently, the block mechanism facility is optional. So shares sold by an investor are either transferred to brokers’ pool and then sent to the clearing corporation or remain blocked in an investor’s demat account and get delivered to the clearing corporation directly. Going ahead, the former option will cease to exist.

Sebi, in a circular on Friday, said that the decision was taken “considering the benefits of block mechanism”. The regulator added that it had extensive consultations with depositories, clearing corporations and stock exchanges on the block mechanism framework and that certain brokers were opposed to the move.

Following the Karvy scandal in 2019, Sebi had announced a slew of measures to prevent misuse of client securities by brokers. These included doing away with the concept of power of attorney and introducing a new pledge and re-pledge mechanism.

One subscription. Two world-class reads.

Already subscribed? Log in

Subscribe to read the full story →
Subscribe to Business Standard digital and get complimentary access to The New York Times

Quarterly Starter

₹900

3 Months

₹300/Month

SAVE 25%

Smart Essential

₹2,700

1 Year

₹225/Month

Save 46%

Super Saver

₹3,900

2 Years

₹162/Month

Subscribe

Renews automatically, cancel anytime

Here’s what’s included in our digital subscription plans

Access to Exclusive Premium Stories Online

  • Over 30 behind the paywall stories daily, handpicked by our editors for subscribers

Complimentary Access to The New York Times

  • News, Games, Cooking, Audio, Wirecutter & The Athletic

Business Standard Epaper

  • Digital replica of our daily newspaper — with options to read, save, and share

Curated Newsletters

  • Insights on markets, finance, politics, tech, and more delivered to your inbox

Market Analysis & Investment Insights

  • In-depth market analysis & insights with access to The Smart Investor

Archives

  • Repository of articles and publications dating back to 1997

Ad-free Reading

  • Uninterrupted reading experience with no advertisements

Seamless Access Across All Devices

  • Access Business Standard across devices — mobile, tablet, or PC, via web or app

Topics :SEBIdemat accounts

Next Story