This short article has been written by Adhya Gupta. She is a Law student at the University of Petroleum and Energy Studies, Dehradun
ABSTRACT
On June 3, 2025, the Securities and Exchange Board of India (“SEBI”) issued Circular No. SEBI/HO/MIRSD/MIRSD‑PoD/P/CIR/2025/82, mandating a streamlined, automated mechanism for the invocation and sale of pledged securities as margin collateral by brokers and trading members. The move addresses persistent inefficiencies wherein invoked securities frequently remained unsold in brokers’ demat accounts, detracting from the intended objective of generating immediate liquidity through invocation. Under the new framework, client‑initiated sales of pledged securities will be executed via a single instruction, “pledge release for early pay‑in”, enabling immediate pledge release and settlement without manual intervention.
When a broker initiates the invocation, the corresponding shares, excluding units of unlisted mutual funds, will be immediately blocked from the client’s demat account for early pay-in. A clear and auditable trail of this transaction will be maintained in the broker’s margin pledge account. A bespoke “invocation cum redemption” process will apply to unlisted mutual fund units, allowing automatic redemption post‑invocation. Additionally, in scenarios where client trading accounts are frozen or restricted post‑pledge, the invoked securities will be moved to the broker’s demat account. and sold under proprietary codes on the same day to prevent accumulation.
These provisions, set to take effect from September 5, 2025, are backed by depositories’ obligation to provide clear operating guidelines by July 1, 2025. Through automation and integration of invocation and sale processes, SEBI aims to eliminate manual delays, enhance operational efficiency, reduce systemic risks, and strengthen investor protection in margin‑based transactions.
Keywords: Margin pledge automation; Invocation‑sale integration; Early pay‑in; Client‑security protection; Invocation cum redemption
