Capital markets regulator Sebi on Monday said all demat accounts of stock brokers, which are untagged, need to be appropriately tagged by June-end.
Credit of securities will not be allowed in any demat account left untagged from July 1 onwards. However, credits on account of corporate actions will be permitted, the Securities and Exchange Board of India (Sebi) said in a circular.
Tagging of bank and demat accounts reflect the purpose for which those bank/demat accounts are being maintained and the reporting of such accounts to the stock exchanges/depositories.
Sebi further said that debit of securities will also not be allowed in any demat account left untagged from August.
The stock broker will have to obtain permission from stock exchanges to allow tagging of such demat accounts from August 1 onwards and in turn exchanges need to grant such approval within two working days after imposing penalty as per their internal policy.
"All demat accounts of stock brokers which are untagged need to be appropriately tagged by June 30, 2022," Sebi said.
The framework will not be applicable for the demat accounts which are used exclusively for banking activities by stock brokers which are also banks.
At present, stock brokers are required to maintain demat accounts only under five categories—proprietary account, pool account, client unpaid securities, client securities margin pledge account and client securities under margin funding account.
Under the rules, naming proprietary demat accounts of the stock broker as 'Stock Broker Proprietary Account' is voluntary and accounts which are not tagged would be deemed to be proprietary.