All demat accounts maintained by stock brokers must be tagged by June-end, says SEBI circular; no buying, selling from untagged accounts from 1 July

In order to increase transparency, market regulator Securities and Exchange Board of India (SEBI) has asked stock brokers to tag all the untagged demat accounts by June-end.

In a circular issued on Monday, the market watchdog has directed the stock brokers to tag all the demat accounts in different categories. The above move is with a view to know for what purpose has a demat account been open by the stock brokers.

SEBI has given the brokers time till 30 June to implement the tagging of demat accounts.

If the accounts remain untagged from 1 July, any fresh buying from thse accounts will not be allowed.

However, the shares will get credited as a result of corporate action. The account holders whose accounts remain untagged will also not be able to sell the shares from their accounts.

The exchanges and depositories will have to submit their compliance reports on 1 July and 1 August.

As per the SEBI norms, there are five types of demat accounts that are opened.

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Sebi tightens rules on demat accounts.

1. The proker will now have to categorise demat accounts and tell its purpose.
2. The tagging of demat accounts must be completed by 30 June.  
3. Shares could not be added in untagged demat accounts from 1 July.
4. No impact on addition of shares in connection with the corporate action.
5. From 1 August, shares could not be sold from untagged accounts.
6. Exchanges, and depositories must submit their compliance reports by 1 July and 1 August.
7. Currently, demat accounts opened fall under 5 categories.

5 categories in which demat accounts are opened

- Proprietary Account – for self trading 
- Pool Account – for settlements.  
- Client unpaid securities – for client’s unpaid shares       
- Client securities margin pledge – pledging client shares for margins  
- Client securities under margin funding – funded securities for margin securities