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TMI BlogUpstreaming of clients’ funds by Stock Brokers (SBs) / Clearing Members (CMs) to Clearing Corporations (CCs)X X X X Extracts X X X X X X X X Extracts X X X X ..... o ensure orderly functioning of the securities market and to protect the interest of investors in securities market. 2. In this regard, with a view to safeguard clients funds placed with SBs/CMs, it has been decided to require the upstreaming of all client funds received by SBs/CMs to the Clearing Corporations (CCs). 3. As per the framework, no clients funds shall be retained by SBs/ CMs on End of Day (EoD) basis. The clients funds shall all be upstreamed by SB/ CMs to CCs only in the form of either cash, lien on FDR (subject to certain conditions enumerated below), or pledge of units of Mutual Fund Overnight Schemes (MFOS). The details of the framework are as follows: A. Upstreaming via FDRs created out of clients funds: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttlement (TREPS). Such MFOS units should be in dematerialized (demat) form, and must necessarily be pledged with a CC at all times. III. SBs/CMs shall maintain a dedicated demat account (hereinafter referred to as Client Nodal MFOS Account ) for subscription/ redemption of MFOS units. The depositories shall allow subscription/redemption transactions only in the said account. IV. From Client Nodal MFOS Account , SBs/CMs shall provide MFOS units as collateral to the CC. While providing the units as collateral, SBs/CMs shall identify the end clients. In order to implement the same, a pledge shall be created from the Client Nodal MFOS account to SB/CM margin pledge account of the SB/CM. The SB/CM shall further repledge the same to CC us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cs. The nomenclature for such accounts shall be Name of the SB/CM DSCNB account . III. In addition, CMs, who clear trades for other SBs, shall only use the designated bank account(s) maintained with the nomenclature Name of the CM TM prop account to receive/pay proprietary funds from/to stock brokers. IV. Upstreaming of funds : Funds received on a given day by SBs shall be transferred to CMs, and by CMs to the CC any time during the day, but not later than the respective cutoff times. The respective cutoff times for upstreaming are as follow: Sr. No. Particular Cutoff time 1 CM upstreaming cutoff time To ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this cutoff time by CCs/CMs/SBs, the payments shall be made on the next settlement day. VIII. The release requests received from the clients before client release request cutoff time must be processed the same day. Further, such funds received from the CC must either be paid out to the clients on the same day or upstreamed back to the CC on the same day. IX. The SBs/CMs may seek withdrawal of client funds from CCs only under following scenarios: a) Client unpaid securities obligations / MTF Obligations b) Loss due to sale of unpaid securities c) Penalties d) Statutory levies (STT / Stamp Duty / SEBI Turnover Fee) e) Brokerage (including exchange transaction fee) f) Other charges (DP charges, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mechanism to adjust the margin blocked in the form of cash, towards client fund pay-in obligations. Such mechanism shall be provided by CCs by 1st January 2024. 6. The provisions of this framework shall not be applicable to bank-CMs (including Custodians that are banks), and for proprietary funds of SBs/CMs in any segment and SB s proprietary funds deposited with CM in the capacity of a client. 7. The provisions of this circular shall come into effect from July 01, 2023. Monitoring mechanisms 8. The stock exchanges and CCs shall create an SOP for monitoring the implementation of provisions of this Circular and put in place a uniform penalty structure for non-compliance. 9. The stock exchanges, depositories, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NBA will have to be transferred to CC only via CM Settlement account during the day, but not later than the stipulated cutoff times Downstreaming (D1) Withdrawal of funds from CC received in Settlement A/c other than client payables shall only be transferred to Member's OWN account (Dues of clients to Member) (D2) Withdrawal of funds received in Settlement A/c from CC by CM towards TM payables shall only be transferred to Clearing Member's DSCNBA account; this step will not be applicable in case of SCM (D3) Withdrawal of funds from CM DSCNBA other than client payables shall only be transferred to Trading Member's OWN account (Dues of clients to Member); this step will not be applicable in case of SCM ..... X X X X Extracts X X X X X X X X Extracts X X X X
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