UPDATED NORMS OF SEBI REGARDING MARGINAL COLLECTIONS

Back in November 2019, Securities Exchange Board of India (SEBI) introduced the framework of the margin collection which can be used by brokers to collect their commission more securely without exploiting the norms of SEBI which deals with brokerage collection. For several years previously the right cash margins were not demanded from the clients by the brokers, which was taken as an advantage by the brokers but after 2019 rules about the marginal collection, clients and brokers were bound by its rules and had to follow it to avoid violations. 

Now in the month of August 2020, new rules are added to the margin collection which is going to bring manifold challenges for the investors and stockbrokers alike, and now the rules are made rigid by the SEBI norms due to avoid any security issues or security breaches. Due to the latest order of SEBI, it has become difficult for investors as they will be subject to an upfront margin before the execution of the trade. 

From September 1—2020, these rules will be applied to the brokers where they have to report the margin collections upfront to the SEBI and that will be available to the clients as well, which means it will be available for the public too. And if the broker fails to do so, they will be slapped with a fine as a penalty for not following the rules and SEBI has stated that this methodology is going to help them approach the levy of margins on their clients which can be beneficial for them.

Previously payment of upfront margin while buying and selling of stocks in the cash segment was not needed. But now SEBI the regulatory body has made the collection of upfront margins in the cash segment compulsory further SEBI has asked the brokers to desist the usage of Power of Attorney (POA) for share pledging. Due to this updated rule, at least a 30% upfront margin is required even in the cash segment.