Sebi mulls guidelines for managing unclaimed funds of clients
Aug 9, 2023
The Sebi move aims to facilitate the prompt and effective restitution of unclaimed funds of clients lying with the stock brokers. This will also stop any potential misuse of these funds by stock brokers.
The Securities and Exchange Board of India (Sebi) in it’s annual report 2022-23 said the market regulator is set to introduce comprehensive protocols for unclaimed funds of clients lying with the stock brokers and mandate them to find out the whereabouts of the investors for return of the money.
The market regulator's move aims to facilitate the prompt and effective restitution of unclaimed funds of clients lying with the stock brokers. This will also stop any potential misuse of these funds by the stock brokers.
The Sebi said the forthcoming regulations will mandate stock brokers to locate the investors and promptly refund their funds and even if the investors remain untraceable, the undistributed funds will not remain lying with the stock brokers, but will be channelled into the investor protection funds of stock exchanges.
This will ensure that unclaimed funds of clients lying with the stock brokers are returned to the respective clients in a timely and efficient manner.
The Sebi in its annual report 2022-23 said, “It is proposed to have a detailed procedure for treatment of unclaimed funds of clients lying with the TMs, in which the TMs shall make efforts to find out the whereabouts of the clients for return of such funds."
“The stock brokers must engage in efforts to locate investors over a span of 10 years. If, after the lapse of the 10-year period, the investors cannot be located, the undistributed funds will be transferred to the investor protection funds hosted by the stock exchanges," the Sebi said in it’s annual report 2022-23.
Earlier in 2022, the market regulator asked all entities--having listed non-convertible securities--to submit detailed information about unclaimed redemption and dividends amount. Sebi also announced that it would examine mandating digital assurance in respect of financial statements disclosed by listed entities.
"There is increasing availability of external information sources that provide information on the listed entity and its financial statements. An auditor may rely on such digital information, from external information sources in its routine nature of auditing," the Sebi annual report 2022-23 said
The Sebi annual report 2022-23 also said in order to encourage and make the process easier for retail investors to participate in the voting on motions moved by listed companies, the market regulator is planning to facilitate various channels for participation such as the website or app of the broker and depository participant.
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