CUSPA, or Client Unpaid Securities Pledgee Account, is a specialized account maintained by trading members (brokers) at depositories such as NSDL (National Securities Depository Limited) or CDSL (Central Depository Services Limited). Its primary purpose is to handle unpaid securities purchased by clients who haven’t completed the payment process.
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+1 days), the unfunded securities are transferred to the broker’s CUSPA account.
Auto-Pledge:
These unfunded securities are automatically pledged in favor of the CUSPA account, essentially acting as collateral for the outstanding payment.
What Happens if Your Securities Are in CUSPA?
Once the securities are in CUSPA:
Notification:
The broker is obligated to notify the investor about the non-payment and the transfer to CUSPA.
Payment Window:
The investor has a limited window (usually T+5 days) to make the payment and have the securities transferred back to their demat account.
Non-Payment Consequences:
If the investor fails to settle the dues within the specified timeframe, the broker has the right to sell the pledged securities on the stock exchange to recover the outstanding amount.
Margin Benefit: There will be no margin benefit or trading exposure given against securities pledged under CUSPA
Corporate Action: All benefits of corporate actions will be directly credited to your DEMAT account to enhance transparency
Benefits of CUSPA
Streamlined Settlement:
CUSPA ensures a smoother settlement process by holding unpaid securities and facilitating easier recovery for brokers.
Transparency:
The auto-pledge feature provides transparency to investors regarding the status of their securities and potential consequences of non-payment.
Reduced Risk:
By holding unpaid securities as collateral, CUSPA mitigates the risk of brokers incurring losses due to client defaults.
Investor Considerations with CUSPA
Timely Payments:
Investors need to be aware of their payment obligations and ensure timely settlements to avoid their purchased securities being transferred to CUSPA.
Charges
Auto Pledge - 25/- + 18% GST per ISIN per Pledge
Auto Un-Pledge - 0/-
Pledge Invocation - 25/- + 18% GST per ISIN per Pledge
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