SEBI allows brokers to invest clients’ fund in overnight MF schemes

Funds must be in demat form and pledged with clearing corporations [View in browser]( [See all newsletters]( 13 December 2023 SEBI allows brokers to invest clients’ fund in overnight MF schemes [ ] Capital market regulator [SEBI]( allowed stock brokers and clearing members to park client funds in mutual fund overnight schemes as they invest only in risk-free government securities. Brokers and clearing members should ensure that the overnight schemes invest only in government bond, overnight repo markets and overnight Tri-party Repo Dealing and Settlement (TREPS). Such Mutual Fund Overnight Schemes (MFOS) units should be in dematerialised (demat) form and must necessarily be pledged with a clearing corporation at all times. In June, SEBI had specified framework for SB/CMs to upstream clients’ funds to clearing corporations with a view to safeguard clients’ funds placed with stock brokers and clearing members. Also read: [SEBI chief bats for smaller SIPs, sachetisation of MFs]( However, the market regulator had received representation from various stakeholders including stockbrokers and brokers’ associations citing certain operational difficulties in implementation. In order to address the issue, SEBI advised the industry associations to consult with market infrastructure institutions under the aegis of Broker’s Industry Standards Forum and submit a proposal so that the principle of upstreaming is complied with and operational difficulties are suitably addressed. Key criteria The recommendations made by ISF have been considered by SEBI as a step towards ease of doing business. The basic principles include that SBs andCMs will upstream clients’ clear credit balances to CCs on End of Day basis, such upstreaming shall be done only in the form of either cash, lien on Fixed Deposit Receipts (FDRs) created out of clients’ funds, or pledge of units of MFOS created out of clients’ funds, it said. Stock brokers should maintain designated client bank account. The nomenclature of all such accounts shall be changed to Up Streaming Client Nodal Bank Account for receive clients’ funds and Down Streaming Client Nodal Bank Account for payment to clients. Also read: [No immediate plan to raise retail investors’ quota in IPOs, says SEBI Chief Buch]( All payment requests of the client to release funds during the day will be processed on or before the next settlement day. The bank instruments provided by clients as collateral cannot be upstreamed to CCs, and they will be ineligible as collateral in any segment of the securities market. However, in the interest of encouraging and development of hedging in the commodity derivatives market, it has been decided to allow bank guarantees provided only by non-individual clients with declaration and underwriting that they shall have no recourse to SEBI or exchanges in case of wrongful invocation of such BGs by SB/CM. You Might Also Like [Retail inflation rises to 3-month high; industrial growth hits 16-month high of 11.7% in October]( [Economy]( [Retail inflation rises to 3-month high; industrial growth hits 16-month high of 11.7% in October]( [Omidyar Network to exit India by 2024]( [Companies]( [Omidyar Network to exit India by 2024]( [Google’s Epic loss could impact India case]( [Info-tech]( [Google’s Epic loss could impact India case]( [Indian govt fears Rabi onion production may drop sharply]( [Agri Business]( [Indian govt fears Rabi onion production may drop sharply]( Stay informed Subscribe to businessline to stay up-to-date with in-depth business news from India [arrow]( Copyright @ 2023, THG PUBLISHING PVT LTD. If you are facing any trouble in viewing this newsletter, please try [here]( Manage your newsletter subscription preferences [here]( If you do not wish to receive such emails go [here](