SEBI would yet again meet stock brokers on Monday before the margin system in the cash segment and discontinuation of the use of Power of Attorney (PoA) for pledging of shares comes into effect from September. It will be to take a last minute account of the situation.
Brokers have complained to SEBI that there were problems with regard to mapping of unique client code. However, the two depository participants (DPs) NSDL and CDSL that hold investor shares in demat have shown their preparedness.
The DPs have informed that hundreds of their agents have set up the margin pledge across several brokers and thousands of clients and that the system was working fine.
Earlier, there was no requirement of upfront margin to be paid for buying and selling of stocks in the cash segment. That will change from September and at least 30 percent upfront margin is required even in the cash segment.
Brokers used shares as margin and as PoA was issued to them by clients, they transferred their shares from one account to another.
This use of PoA for creation pledge to account for initial trading margin, has been discontinued.
Instead, SEBI has said that brokers should create a legal pledge of share based on specific instructions. This creation and revocation of pledge attracts charges from the two DPs and has to be borne by clients.