SEBI Circular on Handling of Client’s Unpaid Securities by Trading Members

[secmarkupdates]

Date of Issue: 03-07-2026

Highlights of  the Circular :

SEBI has revised the rules for how stock brokers must handle unpaid securities (shares bought by clients but not yet fully paid for). The objective is to simplify operations while protecting investors.

Key changes

• Direct credit to client's demat account: Unpaid securities will first be credited directly to the client's demat account.
  
  
• Automatic pledge: These securities will then be automatically pledged (without requiring client instructions) in favour of the broker's Client Unpaid Securities Pledgee Account (CUSPA) until payment is received.
  
  
• Client notification: Brokers must inform clients via email/SMS about the outstanding payment and the possibility of selling the securities if payment is not made.

Broker responsibilities

• Every broker must have a written policy explaining:
  
  
  • Payment timelines (maximum 5 trading days from payout).
    
    
  • When the pledge will be released or invoked.
    
    
  • How unpaid securities will be liquidated if necessary.
    
    
• Brokers cannot provide additional trading exposure to clients based on these unpaid pledged securities.

If the client pays

• The broker must review the pledged value daily.
  
  
• If the pledge exceeds what is necessary, the excess securities must be released promptly.

If the client does not pay

• The broker may invoke the pledge after giving reasonable notice.
  
  
• The securities can then be sold using the client's Unique Client Code (UCC).
  
  
• Any surplus amount remaining after recovery of dues must be credited back to the client's account.

Automatic release

• If the broker neither invokes nor releases the pledge within 5 trading days, the depository will automatically release the pledge on the 6th trading day, making the securities freely available to the client.

Exceptional situations

If the securities cannot be sold due to reasons such as:

• Lower circuit with only sellers,
  
  
• Trading suspension or halt,
  
  
• Other exceptional circumstances,

the broker may request an extension of the pledge for up to one additional calendar week, with further extensions only if the exceptional circumstances continue. Clients must be informed of every extension.

Implementation timeline

• Stock exchanges must issue operational guidelines within 30 days.
  
  
• Most amended provisions become effective 3 months after those operational guidelines are issued.
  
  
• Extension-related provisions become effective 6 months from the date of this circular.