Demat accounts maintained by stock brokers must be tagged by June end: SEBI

21 Jun 2022 , 09:26 AM

SEBI, the capital markets regulator, said on Monday (21-06-2022) that all untagged Demat accounts held by stock brokers must be tagged by the end of June. From July 1, no securities will be credited to any Demat account that has not been tagged. Credits for corporate acts, on the other hand, would be permissible, according to a circular issued by the Securities and Exchange Board of India (Sebi).

The reason for which bank and Demat accounts are kept, as well as the reporting of such accounts to stock exchanges and depositories, are reflected in the tagging of bank and Demat accounts. The debit of securities would also be prohibited in any Demat account that has not been tagged since August, according to the Sebi.

From August 1 onwards, stock brokers must acquire permission from stock exchanges to allow tagging of such Demat accounts, and stock exchanges must issue such authorization within two working days after applying a penalty in accordance with their internal policy. “By June 30, 2022, all untagged Demat accounts of stock brokers must be suitably tagged,” Sebi stated.

Demat accounts, which are used exclusively for banking operations by stock brokers who are also banks, will be exempt from the framework. Only five types of Demat accounts are now needed by stock brokers: proprietary, pool, client unpaid securities, client securities margin pledge account, and client securities under margin financing account.

According to the guidelines, tagging a stock broker’s private Demat accounts as ‘Stock Broker Proprietary Account’ is optional, and accounts that are not marked would be considered proprietary.