Circular No. HO/47/14/12(1)2026-MRD-POD2/I/4229/2026, Dated 05.02.2026
The Securities and Exchange Board of India (SEBI) has issued a circular modifying the framework for the creation and invocation of pledge of securities through the depository system.
The changes are aimed at strengthening contractual compliance, investor protection, and process standardisation.
1. Mandatory Undertakings in Pledge Request Forms
Under the revised framework:
- Pledge request forms must include explicit undertakings by both the pledger and the pledgee.
- These undertakings shall confirm compliance with the provisions of the Indian Contract Act, 1872.
2. Requirement of Reasonable Notice Before Sale
The undertakings must specifically cover:
- The obligation to provide reasonable notice to the pledger
- Prior to the sale or invocation of pledged securities, as required under contract law
This measure reinforces legal safeguards and ensures fair treatment in pledge enforcement.
3. Standardisation of Pledge Request Forms
SEBI has further directed that:
- Depositories shall maintain a standardised pledge request form
- Uniformity in documentation will help ensure:
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- Consistent disclosures
- Clear allocation of rights and responsibilities
- Reduced scope for disputes and ambiguity
4. Implementation Timeline
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The provisions of this circular shall be implemented on or before 6 April 2026.
Depositories, intermediaries, and market participants are required to align their systems, documentation, and processes within the stipulated timeline.
5. Key Takeaway
The revised framework:
- Strengthens compliance with contractual law
- Enhances transparency and investor protection in pledge transactions
- Promotes standardisation across the depository system
Click Here To Read The Full Circular
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