Policy of Client Unpaid Securities Pledge Account (CUSPA)
Policy of Client Unpaid Securities Pledge Account (CUSPA)
1. Background and Purpose
This SOP/Policy defines the processes for managing unpaid securities under the Clients’ Unpaid Securities Pledgee Account (CUSPA) framework at AUM Securities Pvt. Ltd.
It is aligned with the following regulatory circulars:
- SEBI/HO/MIRSD/MIRSD-PoD-1/P/CIR/2022/153 (dated November 11, 2022)
- SEBI/HO/MIRSD/MIRSD-PoD-1/P/CIR/2024/75 (dated June 5, 2024)
- NSE circular NSE/INSP/61507 dated 05/04/2024
2. Scope
Scope This SOP/Policy applies to all equity settlement obligations (T+1) where a client has not provided sufficient funds to settle trades.
To streamline the process of handling client securities and prevent misuse, SEBI has mandated brokers to open a Client Unpaid Securities Pledgee Account (CUSPA).
3. What is CUSPA?
CUSPA, or Client Unpaid Securities Pledgee Account, is a special type of account maintained by trading members (brokers) at depositories (NSDL or CDSL). Its primary purpose is to hold unpaid securities purchased by clients who haven't completed the payment process.
4. How does CUSPA work?
Here's a breakdown of the CUSPA mechanism:
- Transaction Initiation: An investor initiates a trade to buy securities.
- Settlement Obligation: The broker has a T+1 (settlement day) obligation to deliver the purchased securities to the investor's demat account.
- Payment Failure: : If the investor fails to make the required payment for the purchased securities within a specified timeframe (typically T+1days), the unfunded securities are transferred to the broker's CUSPA account.
- Auto-Pledge: These unfunded securities are automatically pledged in favour of the CUSPA account, essentially acting as collateral for the outstanding payment.
5. Key Principles
- Pledge Coverage: Securities equal to 120% of the client’s debit balance are pledged into CUSPA. This could sometimes be more than 120% depending on market conditions, as decided by the Risk Management team.
- Automated Pledge:From February 24, 2025, clearing corporations directly credit securities into clients’ demat accounts; unpaid securities are simultaneously pledged in favour of AUM CUSPA account.
- Charges: Standard charges for pledge, unpledge, invocation, and liquidation apply.
- Client Rights:Clients may independently liquidate pledged securities at any time.
- Auto-Release: Uninvoked or unreleased pledges automatically release after seven working days, as per SEBI rules.
At the time of securities pay-out settlement, If the Client fails to meet his fund obligation and securities are unpaid, the securities will be transferred to the buyer's demat account along with the creation of an auto-pledge in favour of AUM Securities Pvt. Ltd. (AUM) Client Unpaid Securities Pledgee Account (CUSPА).
Pledge/Un-pledge charges shall be applicable and the client will be notified via email about their pledge/unpledged securities transactions. If the client fulfills the fund obligation within 5 trading days from the pay-out day (T+1+5), the securities will be unpledged and will be available as free balance in the client's demat account.
In the event of non-receipt of funds from the client against unpaid securities, AUM will liquidate the securities in the market on T+6 Day as per RMS Policy.
Broker’s Industry Standards Forum (ISF) with respect to aforesaid provision and in consultation with SEBI, it is clarified that unpaid securities pledged in favor of CUSPA account of member (reduced by the appropriate haircut subject to minimum 20%) may be considered for collection and reporting of margin by member to the extent of debit balances in client ledger arising out of buying obligation of such securities.
Prior intimation shall be sent one-day prior regarding CUSPA liquidation the extent of ledger debit.
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ATTENTION INVESTORS!
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Beware of guaranteed returns:
Beware of fixed/guaranteed/regular returns/ capital protection schemes. Brokers or their authorized persons or any of their associates are not authorized to offer fixed/guaranteed/regular returns/ capital protection on your investment or authorized to enter into any loan agreement with you to pay interest on the funds offered by you. Please note that in case of default of a member claim for funds or securities given to the broker under any arrangement/ agreement of indicative return will not be accepted by the relevant Committee of the Exchange as per the approved norms. -
Do not keep funds idle:
Do not keep funds idle with the Stock Broker. Please note that your stock broker has to return the credit balance lying with them, within three working days in case you have not done any transaction within last 30 calendar days. Please note that in case of default of a Member, claim for funds and securities, without any transaction on the exchange will not be accepted by the relevant Committee of the Exchange as per the approved norms. -
Check account settlements:
Check the frequency of accounts settlement opted for. If you have opted for running account, please ensure that your broker settles your account and, in any case, not later than once in 90 days (or 30 days if you have opted for 30 days settlement). In case of declaration of trading member as defaulter, the claims of clients against such defaulter member would be subject to norms for eligibility of claims for compensation from IPF to the clients of the defaulter member. These norms are available on Exchange website at following link: https://www.nseindia.com/invest/about-defaulter-section. -
No direct security transfers:
Brokers are not permitted to accept transfer of securities as margin. Securities offered as margin/ collateral MUST remain in the account of the client and can be pledged to the broker only by way of ‘margin pledge’, created in the Depository system. Clients are not permitted to place any securities with the broker or associate of the broker or authorized person of the broker for any reason. Broker can take securities belonging to clients only for settlement of securities sold by the client. -
Keep contact details updated:
Always keep your contact details viz. Mobile number/Email ID updated with the stock broker. Email and mobile number is mandatory and you must provide the same to your broker for updation in Exchange records. You must immediately take up the matter with Stock Broker/Exchange if you are not receiving the messages from Exchange/Depositories regularly. -
Verify trades regularly:
Don't ignore any emails/SMSs received from the Exchange for trades done by you. Verify the same with the Contract notes/Statement of accounts received from your broker and report discrepancy, if any, to your broker in writing immediately and if the Stock Broker does not respond, please take this up with the Exchange/Depositories forthwith. -
Review weekly statements:
Check messages sent by Exchanges on a weekly basis regarding funds and securities balances reported by the trading member, compare it with the weekly statement of account sent by broker and immediately raise a concern to the exchange if you notice a discrepancy. -
Avoid unauthorized transfers:
Please do not transfer funds, for the purposes of trading to anyone, including an authorized person or an associate of the broker, other than a SEBI registered Stock broker.”