Sebi gives clean chit to depositaries

Sujoy Manna

Mumbai, Aug 14: The Securities and Exchange Board of India (Sebi) finds no misuse of shares lying in the pool account by the depositaries.

According to the report submitted to the Joint Parliamentary Committee (JPC), Sebi has maintained that preliminary findings of the inspection did not reveal any misuse of shares lying in the pool account by the depositaries and also by the brokers, who were inspected randomly.

This finding assumes significance, especially because there have been a number of instances of misuse of pool account of depositories that had prompted the JPC team to raise the issue and views from Sebi.

Sebi has carried out inspection of National Securities Depositary Ltd (NSDL) and Central Depositary Services (India) Ltd (CDSL) along with some brokers inspected on a random basis, to ascertain whether there was any misuse of pool accounts.

While in case of the two depositaries there were no misuse of shares lying in the pool account, with certain brokers there were instances of delayed delivery of securities to their clients due to various reasons as dispute in transactions, non-payment of consideration and punching of incorrect identification number of client account among others.

The report further adds that the Sebi inspection did not reveal that brokers had used the securities for their own benefit or for making delivery on behalf of other clients. There were instances where brokers had taken written consent of the clients and then made use of the securities lying in the pool account balances.

It can be mentioned here that Sebi has initiated a number of measures to stop any possible misuse of the pool account balances. Such securities cannot be pledged as a security for loans and advances and also for lending and borrowing.

These Securities shall be segregated on the basis of market type and settlement number.

One clearing member can open only one pool account and there has to be audit trail of each security.

Further, the depositaries and stock exchanges has been advised to transfer the securities from the pool account to the respective beneficiary accounts of the clients within four calender days or two working days, whichever is later.

Moreover securities are now delivered directly to the beneficiary accounts.