SEBI REDEFINES ‘PLEDGE’

About:

• SEBI has amended the SEBI (Depositories and Participants) Regulations by including an additional explanation that states that ‘pledge’ would also refer to ‘re-pledge of securities for margin or settlement obligations.’
  
  
• Onus of bonafide pledge created from margin account of a stock broker will now lie with the depository following the SEBI amendment.
  
  
• This is expected to go a long way in minimising instances where stock brokers misuse client securities by pledging such shares for their own benefit in terms of meeting their margin requirements.
  
  
• The most high-profile matter in the recent past was of Karvy Stock Broking in which the Hyderabad-based firm raised funds from entities such as Bajaj Finance, ICICI Bank, HDFC Bank and IndusInd Bank by pledging client securities.