Law enforcement agencies in India are now directing stock exchanges to withhold payout of clients if they are investigating any criminal angle involving the clients or their trades. On February 24, the National Stock Exchange (NSE) said it had withheld the payout of certain entities for trading on February 21 on direction from enforcement authorities. 

“The exchange has been advised to stop all fraudulent transactions/activities executed in the trading account of the complainant on February 21, till further instructions. Accordingly, securities and funds payout with regard to certain clients, who are counter parties for the said trades in certain stocks/contracts have been withheld. The matter is under investigation with the Enforcement Authority,” NSE circular said. Its not clear what triggered this action on February 21 

Securities market legal experts say there has been an increasing trend where even police after registering first information reports in many cases are asking stock exchanges and clearing corporations to withhold payout until there is some outcome in the matter by the courts. Under the securities law, usually market regulator SEBI has the power to ask exchanges and clearing houses to hold back payout through their orders that give details of their actions and the case, experts said. 

Experts said there is a need for SEBI and exchanges to set criteria and parameters that would specify when and under what circumstances the payouts will be withheld.

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