SMDRP/Policy/Cir-05/2001

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SECURITIES AND EXCHANGE BOARD OF INDIA SECONDARY MARKET DEPARTMENT Mittal Court, B Wing, First Floor, 224, Nariman Point, Mumbai 400 021

SMDRP/Policy/Cir-05/2001 February 01, 2001

To,

The President/Executive Director/ Managing Director of all the Stock Exchanges/ NSDL/CDSL

Dear Sir,

Please refer to SEBI circular no. SMDRP/Policy/Cir-11/99 dated May 7, 1999 advising stock brokers/clearing members to transfer the securities from their respective CM Pool account to the respective beneficiary account of their clients within 15 days from the pay-out day of the settlement.

It has now been decided that with effect from February 12, 2001, clearing member shall be required to transfer the securities from their respective CM Pool account to the respective beneficiary account of their clients within 6 calendar days after the pay-out day, instead of the existing time limit of 15 days.

The securities lying in the pool account beyond the above period would not be eligible for delivery in the subsequent settlement(s) and would also not be eligible for pledging or stock lending purpose, until the same is credited to the beneficiary accounts.

The securities lying in the pool account beyond 6 calendar days would attract a penalty at the rate of 6 basis point per week on the value of securities. The penalty so collected by the depositories shall be credited to a separate account with the depository and earmarked for defraying the expenses in connection with the investors’ education and awareness programs conducted by the depository.

The securities, which are lying in these accounts beyond the specified time period, shall initially be identified based on FIFO (First-In First-Out) basis. However, with effect from March 5, 2001, the securities shall be identified based on the settlement number basis. The clearing corporation/houses of the stock exchanges shall provide the settlement-wise details of securities to the depositories and the depositories shall maintain the settlement-wise records for the purpose.

Further with effect from April 2, 2001, stock exchanges shall introduce the settlement system for direct delivery of securities to the investors. Clearing corporation/clearing house (CC/CH) shall ascertain from each clearing member, the beneficial account details of their respective clients who are due to receive pay out of securities. Based on this, the CC/CH shall send pay out instructions to the depositories so that the client receives pay out of securities directly to the extent of instructions received from the respective clearing members. To the extent of instruction not received, the securities shall be credited to the CM pool account.

With effect from April 2, 2001, the time limit of 6 calendar days after the pay-out day for transferring the balances to the beneficiary accounts of clients shall be reduced to 4 calendar days or 2 working days, whichever is later. The penal provisions mentioned above shall be applicable on the balances lying in the pool account after this period.

The above decisions would not be applicable to the securities lying in CM Pool account maintained with clearing corporation/house of the stock exchange for the purpose of vyaj badla and/or ALBM/BLESS transactions.

Stock exchanges/depositories are advised to implement the above decisions, under intimation to us.

Yours faithfully,

P. K. KURIACHEN DIVISION CHIEF SECONDARY MARKET, DEPOSITORIES, RESEARCH & PUBLICATIONS DEPARTMENT E-mail: kuriachen@sebi.gov.in