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Economy
Mahesh

14/01/24 06:48 AM IST

SEBI’s new norms safeguard investors

In News
  • Starting July this year, investors will be allowed to freeze or block their trading accounts in case they notice any suspicious activity.
Guidelines by SEBI
  • SEBI has decided that a 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 will be laid down on or before April 1, 2024.
  • The guidelines will be formulated by the Brokers’ Industry Standards Forum (ISF) under the aegis of stock exchanges, and in consultation with the capital markets regulator.
  • Currently, SEBI has provided investors with the facility of voluntary blocking or freezing their demat accounts, which allow investors to hold their financial instruments in an electronic form, but not their trading accounts, which actually carry out trades in the stock market (more on this later).
Why these guidelines ?
  • The stock broking industry in India has moved from a call and trade type of scenario to largely being online, wherein investors use the login IDs and passwords provided to them by the trading members.
  • A trading member is a stock broker of a stock exchange and registered with SEBI.
  • The member has rights to trade on their account as well as on their clients’ account, but they cannot clear and settle these trades.
  • The markets regulator said that it has been observed that at times, suspicious activities are noticed by investors, but the facility of freezing/blocking of accounts is not available with the majority of trading members.
  • Many a 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
  • The new facility will protect investors from any possible fraud in their trading accounts.
Significance
  • The guidelines will have a detailed policy for voluntary freezing or blocking the online access of the trading account of the client.
  • It will include modes through which a client can request the trading member to voluntarily block their trading accounts and the time period within which the request shall be processed and the trading account shall be frozen/blocked.
  • The guideline will also talk about the action a trading member has to take upon receipt of a request for freezing of trading account and the process for re-enabling the client for trading.
Trading account
  • A trading account is an investment account which helps retail investors to buy or sell securities.
  • While trading in the stock market, the first step is opening of a demat account and the second is opening of a trading account which enables investors to buy and sell shares in the domestic market.
  • Trading account is opened with a stock broking firm which, in turn, provides access to the trading platform of a stock exchange, and allows the execution of trades on behalf of the account holder.
  • It works as a link between the demat account and the bank account.
Source- Indian Express

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