Informist, Wednesday, May 12, 2021
By Rajesh Gajra
The Securities and Exchange Board of India is rightfully keen on having collateral provided by clients to their brokers ring-fenced completely from wrongful use by the broker or the clearing member.
The details put forth by the SEBI's consultation paper on segregation and monitoring of collateral at client are quite exhaustive and there is a good chance of a mechanism emerging that will successfully track, monitor, and segregate the client collateral at every stage.
It will bring good news for investors whose collaterals are otherwise exposed to the current vulnerabilities in the system.
In the Karvy Stock Broking and around 10 other broker fraud cases, the most egregious form of siphoning off had taken place of client securities, including the misuse of client's collateral.
The SEBI paper based the need to ring-fence client collateral on the fact that recent instances of misuse of client collateral by a trading or clearing member had shaken the confidence of investors in market integrity and also brought disrepute to the entire ecosystem of trading.
The new framework proposed in the SEBI paper aims to capture the information on client collateral at every stage, starting from submission to the trading member followed by the retention and subsequent transfer to the clearing member and the clearing corporation.
SEBI wants a system that will allocate the collateral at the clearing corporation up to the client level so that the collateral is utilised towards the margin obligation of that client only.
Further, to provide transparent information to the clients, SEBI proposed a web portal by the clearing corporations or the stock exchanges to allow clients view the collateral reporting by the trading or clearing members.
The new framework does not include the securities provided by clients as collateral through the margin pledge and re-pledge facility in the depository system, as the information on the quantity of securities is already available to exchanges and clearing corporations at each stage.
The new framework's efficiency will be tested during times of broker defaults when the collateral that is held by the defaulting trading or clearing member has to be returned to the clients.
If the return happens seamlessly, the proposed new framework would be a success. If not, then investors will be back to square one.
LATEST ANNOUNCEMENTS
* SEBI makes dividend distribution policy must for top 1,000 listed cos (PTI)
* SEBI seeks public view on recommendations for social stock exchange
* SEBI asks AMCs to pay 20% of key employees' compensation as MF units
* SEBI approves appointment of Arun Raste as MD of NCDEX
ORDERS, ADJUDICATION PROCEEDINGS
* SEBI disgorges 83 mln rupees in PC Jeweller insider trading case
* SEBI bans 6 entities for 2 yrs for manipulative trades in Biocon share trading case (PTI)
* SEBI orders co to refund 298 mln rupees raised in deemed public issue
* SEBI levies 13-mln-rupee fine on 5 in Birla Power GDR fraud case
REGULATIONS (Announced in the past three months)
* SEBI paper proposes to replace promoter with controlling shareholder
* SEBI paper proposes safeguards against misuse of client collateral
* SEBI notifies new business sustainability report for listed cos
* SEBI extends reporting timelines for debenture trustees by 45 days
DATA FROM SEBI
| Date | Unit | Latest | Previous | |
| FII/FPI net equity investment | May 10 | US$ mln | 159.20 | (-)162.92 |
| FII/FPI net debt investment | May 10 | US$ mln | (-)2.38 | 71.93 |
| DIIs net equity investment# | May 5 | bln rupees | 2.59 | 0.92 |
| DIIs net debt investment# | May 5 | bln rupees | (-)1.66 | (-)0.02 |
IPO/FPO/NFO
* Sona Comstar gets SEBI's nod for 60-bln-rupee IPO
* Fincare Small Finance Bank files draft prospectus with SEBI
* Power Grid files final offer document for InvIT with SEBI
* Aditya Birla Sun Life MF seeks SEBI's nod for nifty healthcare ETF
SEBI IN NEWS
* SEBI vets stake control in Zomato's IPO papers for China firm's role (BS)
* SAT upholds SEBI order against 63 Moons Technologies in STP case (PTI)
* SEBI to auction property of PVP Global Ventures on May 12 (PTI)
* SEBI exempts Anurag Benefit Trust from open offer obligations (PTI)
Sources - Television, Print, or Web Editions of: PTI--Press Trust of India, BS--Business Standard, ET--The Economic Times, Moneycontrol, CNBC TV-18, Mint, BL--The Hindu Business Line, TH--The Hindu, RTR—Reuters, BT--Business Today, IANS--Indo-Asian News Service, IE— The Indian Express, ToI--The Times of India, BB-Bloomberg Quint
Internet links: http://www.sebi.gov.in
# –-- Data not available for May 6-7 and May 10
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Compiled by Nivedita Yadav
Edited by Akul Nishant Akhoury
Informist, Wednesday, May 12, 2021
By Rajesh Gajra
The Securities and Exchange Board of India is rightfully keen on having collateral provided by clients to their brokers ring-fenced completely from wrongful use by the broker or the clearing member.
The details put forth by the SEBI's consultation paper on segregation and monitoring of collateral at client are quite exhaustive and there is a good chance of a mechanism emerging that will successfully track, monitor, and segregate the client collateral at every stage.
It will bring good news for investors whose collaterals are otherwise exposed to the current vulnerabilities in the system.
In the Karvy Stock Broking and around 10 other broker fraud cases, the most egregious form of siphoning off had taken place of client securities, including the misuse of client's collateral.
The SEBI paper based the need to ring-fence client collateral on the fact that recent instances of misuse of client collateral by a trading or clearing member had shaken the confidence of investors in market integrity and also brought disrepute to the entire ecosystem of trading.
The new framework proposed in the SEBI paper aims to capture the information on client collateral at every stage, starting from submission to the trading member followed by the retention and subsequent transfer to the clearing member and the clearing corporation.
SEBI wants a system that will allocate the collateral at the clearing corporation up to the client level so that the collateral is utilised towards the margin obligation of that client only.
Further, to provide transparent information to the clients, SEBI proposed a web portal by the clearing corporations or the stock exchanges to allow clients view the collateral reporting by the trading or clearing members.
The new framework does not include the securities provided by clients as collateral through the margin pledge and re-pledge facility in the depository system, as the information on the quantity of securities is already available to exchanges and clearing corporations at each stage.
The new framework's efficiency will be tested during times of broker defaults when the collateral that is held by the defaulting trading or clearing member has to be returned to the clients.
If the return happens seamlessly, the proposed new framework would be a success. If not, then investors will be back to square one.
LATEST ANNOUNCEMENTS
* SEBI makes dividend distribution policy must for top 1,000 listed cos (PTI)
* SEBI seeks public view on recommendations for social stock exchange
* SEBI asks AMCs to pay 20% of key employees' compensation as MF units
* SEBI approves appointment of Arun Raste as MD of NCDEX
ORDERS, ADJUDICATION PROCEEDINGS
* SEBI disgorges 83 mln rupees in PC Jeweller insider trading case
* SEBI bans 6 entities for 2 yrs for manipulative trades in Biocon share trading case (PTI)
* SEBI orders co to refund 298 mln rupees raised in deemed public issue
* SEBI levies 13-mln-rupee fine on 5 in Birla Power GDR fraud case
REGULATIONS (Announced in the past three months)
* SEBI paper proposes to replace promoter with controlling shareholder
* SEBI paper proposes safeguards against misuse of client collateral
* SEBI notifies new business sustainability report for listed cos
* SEBI extends reporting timelines for debenture trustees by 45 days
DATA FROM SEBI
| Date | Unit | Latest | Previous | |
| FII/FPI net equity investment | May 10 | US$ mln | 159.20 | (-)162.92 |
| FII/FPI net debt investment | May 10 | US$ mln | (-)2.38 | 71.93 |
| DIIs net equity investment# | May 5 | bln rupees | 2.59 | 0.92 |
| DIIs net debt investment# | May 5 | bln rupees | (-)1.66 | (-)0.02 |
IPO/FPO/NFO
* Sona Comstar gets SEBI's nod for 60-bln-rupee IPO
* Fincare Small Finance Bank files draft prospectus with SEBI
* Power Grid files final offer document for InvIT with SEBI
* Aditya Birla Sun Life MF seeks SEBI's nod for nifty healthcare ETF
SEBI IN NEWS
* SEBI vets stake control in Zomato's IPO papers for China firm's role (BS)
* SAT upholds SEBI order against 63 Moons Technologies in STP case (PTI)
* SEBI to auction property of PVP Global Ventures on May 12 (PTI)
* SEBI exempts Anurag Benefit Trust from open offer obligations (PTI)
Sources - Television, Print, or Web Editions of: PTI--Press Trust of India, BS--Business Standard, ET--The Economic Times, Moneycontrol, CNBC TV-18, Mint, BL--The Hindu Business Line, TH--The Hindu, RTR—Reuters, BT--Business Today, IANS--Indo-Asian News Service, IE— The Indian Express, ToI--The Times of India, BB-Bloomberg Quint
Internet links: http://www.sebi.gov.in
# –-- Data not available for May 6-7 and May 10
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Compiled by Nivedita Yadav
Edited by Akul Nishant Akhoury
