The Securities and Exchange Board of India (SEBI), on July 3, 2026, amended the framework governing the handling of clients’ unpaid securities by Trading Members (TMs) to align with the mandatory direct payout mechanism and evolving market practices. The revised framework requires unpaid securities (other than those under the Margin Trading Facility) to be credited directly to the client's demat account and automatically pledged in favour of a separate Client Unpaid Securities Pledgee Account (CUSPA) maintained by the Trading Member. Clients must also be informed of their payment obligations and the Trading Member’s right to liquidate such securities in case of default.
The circular mandates Trading Members to formulate and communicate a policy for handling unpaid securities, specifying the timelines and process for invocation or release of pledges and liquidation of securities. The maximum period allowed for clients to fulfil their payment obligations has been capped at five trading days from the payout date. The framework also prescribes daily monitoring of pledged securities, release of excess pledges, invocation procedures, automatic release of pledges after the stipulated period, and prohibits further pledging or transfer of CUSPA-pledged securities to banks or NBFCs for raising funds.
Additionally, SEBI has introduced provisions permitting extension of the pledge period in exceptional circumstances, such as lower circuit restrictions, trading suspensions, or other recognised events preventing liquidation. Stock exchanges are required to issue operational guidelines within 30 days of the circular, while the revised provisions relating to pledge creation, release, invocation, and auto-release shall come into force three months after issuance of such operational guidelines. The provisions relating to extension of pledges shall become effective six months from the date of the circular.
[SEBI Circular No. SEBI/HO/MIRSD-POD-1/P/CIR/2026/15382]
