SEBI suggests a facility for blocking Funds

January 19, 2023
Current Context: Introducing a blocking of funds facility for trading in secondary markets is suggested in a consultation document published by the Securities and Exchange Board of India (SEBI). aims to shield investors' funds against stock brokers' fraud and default.
SEBI suggests a facility for blocking Funds
  • Market players are asked to comment by February 16 on any operational issues with the suggested concept, related processes, transaction flow, and risk management.
  • It will enable trading on the secondary market by investors using blocked funds in their bank accounts
  • It will also reduce the necessity of transferring money to a stockbroker
  • While funds are still in the client's account, they are blocked in favour of the clearing corporation until the block mandate expires, or the clearing corporation releases the block.
  • It provides client-level settlement visibility to clearing companies by directly settling monies and securities between client or investor and CC, similar to the Application Supported by Blocked Amount (ASBA) facility already available for the primary market.
  • Under the current system, stock brokers and clearing members handle the clients' assets before they reach the clearing firm.

Question:

Q.1 Who recently Introduced a blocking of funds facility for trading in secondary markets?
a. ICAI
b. DRDO
c. SEBI
d. NABARD

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