SEBI eases Settlement Norms for Inactive Brokerage Accounts

Current Context: The Securities and Exchange Board of India (SEBI) eased the settlement norms for inactive brokerage accounts on January 6, 2025.

• Here are the detailed changes:
• Previous Norms: Brokers were required to return funds within three working days of identifying inactivity in accounts that had been inactive for over 30 days.
• New Norms: Funds from inactive accounts will now be settled on the upcoming monthly settlement date as specified in the stock exchanges' annual calendars. This means brokers no longer need to settle accounts daily, reducing procedural inefficiencies.
• Client Activity: If a client resumes trading after 30 days but before the upcoming settlement date, the settlement will continue according to the client's chosen preference (monthly or quarterly).
• Purpose: The change aims to simplify operations for brokers and address concerns raised by the Brokers’ Industry Standards Forum (ISF) about the operational challenges of daily settlements.
• Implementation: The new norms came into effect immediately on January 6, 2025.

Question:

1 As per SEBI's revised norms announced on January 6, 2025, funds from inactive brokerage accounts will now be settled:

• A) Daily after identifying inactivity
• B) On the upcoming monthly settlement date specified in stock exchanges' annual calendars
• C) Quarterly as per the client’s preference
• D) After 30 days of inactivity

Answer: B) SEBI eased the settlement norms, allowing brokers to settle funds from inactive accounts on the specified monthly settlement date, instead of requiring daily settlements, to reduce procedural inefficiencies.