1. What is Enhanced Supervision?

SEBI has released their first circular on Enhanced Supervision vide SEBI Circular No. SEBI/HO/MIRSD/MIRSD2/CIR/2016/95 dated 26th September 2016. In this circular and annexures, SEBI has detailed various supervision measures and additional reporting requirements that a stock broker is required to adhere. Some of the requirements are made applicable from 1st April 2017 while others are made applicable from 1st July 2017, 1st August 2017 and 1st April 2018 in a graded manner.


Subsequent circulars on Enhanced Supervision are:

SEBI/HO/MIRSD/MIRSD2/CIR/P/2016/138 dated 20th December 2016

CIR/HO/MIRSD/MIRSD2/CIR/P/2017/64 dated 22nd June 2017


2. What is the restriction with respect to granting exposure to clients where there is a debit balance as per enhanced supervision circular of SEBI?

The following is the extract of SEBI circular No. SEBI/HO/MIRSD/MIRSD2/CIR/2016/95 dated 26th September 2016 Clause 2.6

 

“Stock brokers shall not grant further exposure to the clients when debit balances arise out of client's failure to pay the required amount and such debit balances continues beyond the fifth trading day, as reckoned from date of pay-in.”


Based on the above it is inferred that when clients fail to clear their debit balance beyond 5 days from the date of pay-in or in other words 7 days from the date of trade i.e T+2+5 trading days, then the stock broker is required to block such client accounts and not grant any further exposure to such accounts.


As per SEBI circular Circular No.: CIR/HO/MIRSD/MIRSD2/CIR/P/2017/64 dated 22nd June 2017 the above provisions of clause 2.6 comes into effect from 1st August 2017. Hence we would be blocking all such accounts in compliance of this circular.


3. What is meaning of blocking of account?

Blocking of account means that you cannot BUY or take additional exposure in your account. You can login to your account and only SELL stocks from your DP account/ collateral account or house account.


4. What is House account and why would my stocks be in house account?

House account is the broker DP account. When your purchased shares get delivered by the exchange on T+2 (pay-in day) and if you have not paid for the purchase completely then to the extent of debit your shares would get retained in the house account. Shares retained in the house account are uploaded under DP stocks in the trading and you can sell them just like how you sell your DP stocks.


5. What is the logic of blocking and unblocking of account?

If account is not blocked and if the ageing of debit > 7 days then account will be blocked

If the account is blocked and account is having debit then account continues to be blocked

If the account is blocked and account turns to credit then account will be un-blocked


6. If my account is blocked based on above conditions then what are the steps I can take to un-block my account?

If your account is blocked due to non-clearance of debit balance beyond T+2+5 days then you can take the following steps to unblock your account:

  • Immediately transfer the entire debit amount using our online fund transfer facilities
  • Sell your shares in DP/Collateral/House account if you have and clear the debit completely. Shares can only be sold under CNC product
  • Sell your outstanding positions lying in the broker account and clear the debit completely


7. Is it possible to unblock my account by partially clearing the debit?

No. it is not possible to unblock your account by partially clearing the debit. You need to completely clear the debit


8. Will my account be blocked only for equity segment or all segments?

Your account will be blocked for all segments. However you can sell in CNC mode in Equity and can square off your existing positions in Equity Derivatives / Currency derivative using the NRML product.


9. Can I sell shares from my DP/Collateral/House account if my account is blocked?

Yes you can sell your DP/Collateral/House account shares by logging into the trading system or using our Call N Trade facility even if your account is blocked. Shares can only be sold under CNC product if your account is blocked.


10. If I clear the debit will my account be un-blocked immediately?

No, if you have cleared your entire debit on T day your account would be un-blocked or available for Purchase only from T+1 day.

11. What happens if my account is blocked and I do not clear my debit balance?

If you have not cleared your entire debit by T+2+5 days and your account is blocked on T+2+6th day, then we will start selling all your purchase obligations in house account which are ageing for more than T+2+5 days.


12. If I have a debit in my ledger on T day due to purchase of shares on T day, and if my account is not yet blocked can I take additional exposure on T+1 day / T+2 day etc. based on my collateral value ?


Yes you can take additional exposure based on collateral value as long as your account is not blocked. Let us see this with an example below:


Day
Ledger balance BOD in Rs.
Collateral value after haircut
Purchase amount
Pay-in amount
Ledger balance EOD
Status of account
Is additional exposure possible
T
1,00,000
3,00,000
1,20,000

-20,000
Active
Yes
T+1
-20,000
3,00,000
30,000

-50,000
Active
Yes
T+2
-50,000
3,00,000
0

-50,000
Active
Yes
T+3
-50,000
3,00,000
0

-50,000
Active
Yes
T+4
-50,000
3,00,000
40,000

-90,000
Active
Yes
T+5
-90,000
3,00,000
0

-90,000
Active
Yes
T+6
-90,000
3,00,000
0

-90,000
Active
Yes
T+7
-90,000
3,00,000
20,000

-1,10,000
Active
Yes
T+8
--1,10,000
3,00,000

30,000
-80,000
Blocked
No
T+9
-80,000
3,00,000

50,000
-30,000
Blocked
No
T+10
-30,000
3,00,000

40,000
10,000
Blocked
No
T+11
10,000
3,00,000
3,000

7,000
Active
Yes


Notice that on T+8 your account is blocked and even though you have sufficient collateral which is above your debit, your account will still be blocked as the ageing of debit in your account > 7 days.


Also notice that though on T+10 you have cleared your entire debit by transferring the amount your account continues to be blocked and will be unblocked only next day on T+11.