Sebi extends last date for implementation of new pledging system to Sept 1

Earlier deadline was July 1; Move follows request by depository firms tasked with readying the backend for the new system for extension as the "changes to the systems are still under process"

Market regulator Securities and Exchange Board of India (Sebi) has extended the deadline for the introduction of Demat Debit and Pledging Instruction (DDPI) system to September 1. The earlier deadline for implementation was July 1. However, depository firms tasked with readying the backend for the new system asked the regulator for an extension as the “changes to the systems are still under process”.

The new DDPI system is designed to prevent misuse of client securities by brokers. It does away with the erstwhile power of attorney (POA) system, which was prone to misuse.

The new framework is a more foolproof method for the stock brokers to obtain consent of their clients in for debiting and pledging their securities in the demat account.

“This is similar to the consent taken in the form of a demat POA but off-market transactions (such as gifting) will require stockbrokers to obtain additional consent using the existing physical or electronic modes,” explained Mohit Mehra, Head of IPO, Zerodha.

He added: "From September 1, stockbrokers will not be able to use POAs for accepting standing consent from clients towards the settlement of on-market transactions and pledging for margin. Instead, the stockbroker will need to obtain DDPI from their clients. An investor will have the option of using the DDPI or e-DIS (delivery instruction slip) to transact online without filling a physical instruction slip.”