Summary
Key Points:
- SEBI has issued a circular mandating that pledge request forms include a requirement for pledgees to provide reasonable notice to pledgers before selling pledged securities.
- The circular aligns with Sections 176 and 177 of the Indian Contract Act, 1872, emphasizing the legal obligations of both parties involved in a pledge.
- This initiative aims to enhance transparency and investor protection within the securities market by ensuring compliance with contract law.
Background: The Securities and Exchange Board of India (SEBI) has updated its framework regarding the creation and invocation of pledges on securities, as outlined in its Master Circular for Depositories. This amendment is part of SEBI's ongoing efforts to regulate the securities market and protect investors' interests.
What's Next: Depositories must implement the revised framework by April 6, 2026, including necessary amendments to their bye-laws and systems.
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