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Stock Exchanges settle trades done by the broker member at the net exchange level and not on gross client level basis. Hence, it is our responsibility to settle the deliveries between our clients. Shares which are delivered short by the clients and which have to go to the exchange are auctioned by the exchange. But shares that are delivered short internally are settled in the following manner:
Clients entrust us with their money as well as shares to us. Funds from client are given to us as advance margin for future purchases in the market and shares are kept in our depository account as beneficial owners. Sometimes shares are also left in the company’s pool / beneficiary account since a particular script is not available with the depository for demat purpose.
There is a possibility of teeming and lading of clients’ asset in event of inactivity / lack of attention by the client. The company does take precaution of informing the client on a periodic basis by issuing holding statement / account confirmations. Yet there is a possibility that the client is ignorant about his assets. In such circumstances in order to prevent misuse, it is necessary that the system should generate alerts when such assets are put to use i.e. there is a transition in the account which results in use of funds / share balances.
1. Dormant Client for trading purpose
Dormant client is one who has no transactions in the preceding six consecutive months. Transaction includes a trade in secondary market.
2. Dormant client for DP Services
Dormant client is recognized as per CDSL Bye laws.
3. Appropriate authority
Appropriate Authority shall be the person designated for this purpose. In absence of such designation, the compliance officer of the company will be the appropriate authority.
4. Dormant Status
The dormant status shall be marked so on the first day of each month.
5. Active Status
Active status shall be confirmed through a computer interface on the appropriate authority being satisfied about the genuineness of the identity of the dormant client who has placed order after six month.
Procedure for identification of dormant client.
The Authorised person of the company on a regular basis identifies the dormant client (as defined above) who has placed the trade in secondary market after six month from MIS report generated through system. Authorized authority verifies and confirms the trade done by the client on the contact number registered with database.
Suspension of services
Client will be suspended for trading in case Authorized person gets the unsatisfactory answer from the client who has placed the trade.
Reactivation of the client
Client will not be able to activate for trading till he gives request explanation in writing for removalof suspension of trading code.
All instructions for delivery sell trades through us are taken care by us based on the Power of Attorney (POA) instruction given by client. Thus, clients on-market delivery obligation(s) for shares pay-in is/are met through his CDSL account only or through Inter-Settlement Transfer (IST) process.
All/any share would first be transferred into clients depository account if they are being credited from outside depository and then arranged for meeting shares pay-in obligation, as per clients settlement obligation.
Share pay-in obligation needs to be met with the exchange on T+2 day morning or might also take place as per exchanges revised time/change in settlement cycle. We could also do an early pay-in and so pick stock for pay-in to the exchange earlier than the scheduled T+2 date.
Delivery receipt of shares from the exchange for clients trade obligation is credited into clients depository account as available in clients database. This would happen on assumption that there is no debit in clients financial ledger and/or there is not debit to be recovered from the client. Shares payout will happen after receipt of shares from the exchange, i.e., on T+2 day, which means two market session days after the trade date.
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