In a move aimed at enhancing the security and integrity of India’s capital markets, the Securities and Exchange Board of India (SEBI) announced on Friday that a comprehensive framework for the voluntary blocking of online trading accounts will be established by April 1. The initiative is driven by the need to address instances of suspicious activities in trading accounts, providing investors with a tool similar to the voluntary blocking/freezing option already available for demat accounts.
The framework, to be developed by the Brokers’ Industry Standards Forum (ISF) in collaboration with stock exchanges and SEBI, will lay down guidelines detailing policies for voluntarily freezing or blocking a client’s online trading account. It will encompass communication methods for clients to request such actions, the issuance of acknowledgment upon message receipt, and the timeframe for processing requests and blocking accounts.
The stock broking industry in India has transitioned from traditional call-and-trade practices to online platforms, where investors utilize login IDs and passwords provided by trading members. SEBI noted that despite the shift, the majority of trading members lack the capability to block accounts in response to suspicious activities reported by investors.
SEBI emphasized the urgency of providing a facility for blocking trading accounts, drawing parallels to the existing options for blocking ATM cards and credit cards. The move is seen as crucial in addressing concerns raised by investors regarding suspicious activities in their trading accounts.
“To enhance ease of doing business and ease of investment, it has been decided that the framework for trading members to provide the facility of voluntary freezing/blocking the online access of the trading account to their clients on account of suspicious activities shall be laid down on or before April 1, 2024, by the ISF,” SEBI stated.
Furthermore, SEBI has directed stock exchanges to ensure that the guidelines outlined in the framework are implemented by trading members starting from July 1, 2024.
In a separate circular, SEBI also urged stock exchanges to establish a mechanism for monitoring clients’ funds held by stockbrokers. The monitoring system will be based on the principle that the total available funds, including cash and cash equivalents, with the stockbroker and clearing corporation/clearing member should always be equal to or greater than clients’ funds as per the ledger balance.
These initiatives by SEBI reflect a commitment to ensuring the integrity and security of India’s capital markets while embracing technological advancements in the trading landscape. Investors and industry stakeholders are now anticipating the upcoming framework and its implications on trading practices in the country.