What is a Client Unpaid Securities Pledgee Account (CUSPA)?
In order to further streamline the process of handling client securities and prevent misuse, SEBI has mandated brokers to open a Client Unpaid Securities Pledgee Account (CUSPA). The framework will come into effect from 1st April 2023.
- Equity trades are settled on T+1, where T refers to the trade day.
- Brokers are required to credit securities to the buyer's account within 1 working day of the settlement day. Geojit generally completes this on the settlement day itself.
- If the buyer fails to meet his fund obligation by the settlement day, the securities will be transferred to the buyer's demat account along with the creation of an auto-pledge in favour of Geojit's Client Unpaid Securities Pledgee Account (CUSPA).
- Shares worth 125% of the net debit will be held as pledged in Geojit's CUSPA and the remaining shares will be released to the buyer's demat account on T+1.
- Pledge charges are applicable and the defaulting buyer will be notified via email/SMS regarding their fund obligation.
- If the client fulfills the fund obligation within 4 trading days from the pay-out day (T+1+3), the pledge will be released and the securities will be available as free balance in the client's demat account.
- If the client fails to fulfill the fund obligation within 4 trading days from the pay-out day (T+1+3), the securities will be sold in the market on T+1+4 to recover debits or dues, including penalties, interest, DP charges, etc.
- In situations of payment or delivery failure by the pay-in day, losses and costs are borne by the defaulting party.
- Note that such unpaid securities will not be considered to calculate the margin obligation of the defaulting party.
- To avoid any kind of margin shortage, positions (including derivatives) may be square-off on any of these days. Therefore, it is advisable to ensure timely fulfillment of your fund obligations to avoid any unnecessary losses or risks.
For example, Mr Ajay purchased 100 shares of Axis Bank at Rs. 700 per share using margins, on Monday (T). He fails to meet a fund obligation of Rs. 70,000 on Tuesday (T+1). As a result, the purchased 100 shares are auto-pledged in favour of Geojit's CUSPA.
He will have time to bring in funds to cover his position till Friday (T+1+3). If he fails to do so, Geojit will sell these 100 shares on T+1+4 to recover the debit. Mr Ajay will be liable to pay any applicable charges.
For more information, refer the circular titled Handling of Clients’ Securities by Trading Members(TM) / Clearing Members (CM) on our Notifications page.
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