India, July 4 -- SEBI on Friday came out with a regulatory framework for trading members (TMs) to handle clients' unpaid securities, introducing an auto-pledge mechanism while laying down safeguards for investors.

Under the framework, if trades executed outside the Margin Trading Facility (MTF) remain unpaid, the securities will be credited directly to the client's demat account. Instead of withholding the securities, an auto-pledge will be created in favour of a dedicated account of the trading member - the Client Unpaid Securities Pledgee Account (CUSPA) - without requiring any instruction or approval from the client. The pledge will be specifically marked as "unpaid", as per SEBI guidelines.

After the pledge is created, the TM will b...