NSE unveils norms on treatment of inactive trading account

Applies to accounts where no trades have been carried out since last 12 months

Kumar Shankar Roy Feb 12, 2020

Trading licenceThe National Stock Exchange (NSE) has come out with guidelines regarding treatment of inactive accounts. The norms apply to inactive accounts, which are defined as those where no trades have been carried out since last 12 months across all exchanges. Read on.

Transaction in inactive trading accounts

The inactive accounts identified will be flagged as ’Inactive’ by the trading member, like a broker, in UCC (unique client code) database of all the respective exchanges.

The trading members are required to ensure that any further trading by such client should be allowed only after undertaking sufficient due diligence (including In person verification) and obtaining the updated information related to KYC (know your customer) from the concerned client, says a NSE circular dated Feb. 10, 2020.

Failure to do so may result in appropriate disciplinary actions taken in case of any trades are executed in any account flagged as ‘Inactive’.

All trading members have been advised to upload correct status of the client code in the UCC database of the exchanges prior to the execution of the trades.

Return of assets

The NSE has directed trading members to ensure that all client accounts are settled on monthly or quarterly basis (as per the client preferences) in the manner prescribed from time to time.

In case a member is unable to settle the client accounts due to non-availability of client’s bank account and demat account details and non-traceability of client, trading members have been advised to make all efforts to trace the clients to settle their funds and securities lying with them.

Trading members have been directed to maintain an audit trail for such efforts made for tracing such clients and settling funds and securities of such clients.

In cases where trading members are unable to trace such clients in spite of all efforts taken, they will have to open one separate client bank/client collateral demat account and immediately set aside the funds and securities of these clients in such account.

Also, they have to maintain audit trail of UCC wise client funds transferred to/from such bank account and UCC wise / BO ID wise securities transferred to/from such demat account (as the case may be). BO ID is beneficiary owner identification number.

Additionally, they have to submit UCC wise/BO ID wise and fund/securities information of such account to the exchange on quarterly basis.

In case of receipt of any claims from such clients, NSE has directed trading members to settle the accounts immediately and ensure that the payment/delivery is made to the respective clients only.

Reporting of client funds & securities

In a relief, NSE has said that henceforth, trading members will not be required to upload the details of such inactive clients having NIL balances in their weekly submission of securities holding to the exchange and monthly upload of client funds and securities balances to the exchange.

However, details of clients having funds or securities balances must be reported even if their UCC has been flagged as ‘Inactive’.

Kumar Shankar Roy

Kumar Shankar Roy is contributing editor with RupeeIQ. Kumar is a financial journalist, with a functional experience of 15 years. He tracks mutual funds, insurance, pension, PMS, fixed income/debt and alternative investments markets closely. He has worked for The Times of India, The Hindu Business Line, Deccan Chronicle Group, DNA, and Value Research, among others, across different cities in India. He is deeply interested in marrying data insights with actionable opinion. He can be contacted at kumarsroy@rupeeiq.com.

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