Markets regulator Sebi on Friday asked brokerages to set up a mechanism allowing investors to voluntarily freeze or block their trading accounts.
At present, investors have the option to freeze or block transactions in their demat account, but not in trading a/cs.Market players said though the demat option is available it’s hardly used by investors due to lack of information. The move by Sebi is under its ‘ease of doing investments by investors’ initiative.
When suspicious activities are noticed by investors, the facility of freezing/blocking of accounts is currently not available with majority of the brokers. This was the main trigger for Sebi to put in place a mechanism for freezing/blocking of trading accounts.
By April 1, the framework for freezing and blocking of trading accounts should be made public by the Brokers’ Industry Standards Forum (ISF), an industry trade body that sets processes that brokers should follow. The framework should be operational by July 1, Sebi said.
Sebi said that there should be detailed guidelines on how brokers should act once they receive an intimation about the freezing and blocking of accounts. Sebi also wants each broker to inform their clients about this facility. “Many times, investors raise issues of suspicious activities in their trading accounts and thus, there is an urgent need to address the situation of having a facility for blocking of trading accounts as it is available for blocking of ATM cards and credit cards,” Sebi said in its release.
After this process is launched on July 1, the stock exchanges have to submit a compliance report about its facility to the regulator by August 31, Sebi said. “Stock exchanges shall put in place an appropriate reporting requirement by (brokers) to enforce the above system.”
In another circular, Sebi said that stock exchanges should put in place a mechanism to monitor investors’ funds with stock brokers. Earlier, Sebi had said that investors’ funds and securities parked with their brokers should be periodically settled. This was to ensure that investors’ funds and securities lying in brokers’ pool account is not used by the latter to meet obligations of other investors. The new mechanism is aimed at better monitoring of such funds and will be effective immediately.
