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Business News/ Markets / Stock Markets/  How SEBI's new norms will safeguard stock market investors — Explained

How SEBI's new norms will safeguard stock market investors — Explained

SEBI will implement a framework by April 1 that allows trading members to voluntarily block online access to trading accounts displaying suspicious activities

Sebi has planned to offer the facility of voluntary freezing or blocking of the ‘Trading Accounts’ by clients.Premium
Sebi has planned to offer the facility of voluntary freezing or blocking of the ‘Trading Accounts’ by clients.

Very soon, you can block your trading accounts just like demat accounts, ATMs, and Credit Cards. In a circular dated 12 January, the Securities and Exchange Board of India (Sebi) has planned to offer the facility of voluntary freezing or blocking of the ‘Trading Accounts’ by clients.  SEBI's new security measure will allow customers to voluntarily freeze their trading accounts using various security measures, lowering the likelihood of unlawful trades. Sebi said that there is an urgent need to implement a facility for blocking/freezing trading accounts.

"This is necessary since the trading account may be vulnerable to a hack, which would result in the user being locked out of the account. The new procedure must be widely communicated as this precaution lowers the likelihood of unlawful trades," said Srinivasa Reddy, , Assistant Professor, T A Pai Management Institute (TAPMI), Marketing Management Area

The SEBI initiative is worth appreciating for a facility of voluntary blocking of trading accounts, on the kind of facilities available for ATM Cards and Credit Cards users. “The trigger has been the investors in the past raising issues of suspicious activities in their trading accounts but not having the means to address them promptly. The intent of SEBI is for furthering the ease of doing investments by investors and safeguarding their interests from the suspicious activities in their trading accounts," said Dr. Rajendra K Sinha, Professor & Chairperson, Centre of Excellence in Banking, Jagdish Sheth School of Management.

 Since trading has become online, the process of detailing the dos and don'ts for trading members assumes critical importance. "We are of the view that, the clients being the ultimate resource provider and the risk taker, the clients must have the ultimate authority to voluntarily freeze or re-opening of trading accounts. This freedom goes far beyond the bundles of paperwork that the trading members enter into with their clients. The details of the client’s equity holdings must not be shared at any cost to other clients or trading entities without transaction-specific consent, and such instances must be considered a breach of trust," said Dr. Arunkumar, Associate Dean and Professor, School of Business, RV University.

The capital markets regulator said a framework will be put in place by April 1, allowing trading members to offer the facility of voluntarily blocking online access of trading accounts for clients displaying suspicious activities. Further, the regulator asked stock exchanges to ensure that the guidelines issued under the framework are implemented by trading members from July 1, 2024.

"To enhance ease of doing business and ease of investment, it has been decided that the framework for trading members to provide the facility of voluntary freezing/blocking the online access of the trading account to their clients on account of suspicious activities shall be laid down on or before April 1, 2024, by the ISF," Sebi said in a circular dated 12 January.

Disclaimer: The views and recommendations made above are those of individual analysts, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

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Sangeeta Ojha
A business media enthusiast. Writes on personal finance, business and banking.
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Published: 20 Jan 2024, 03:02 PM IST
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