SEBI Tightens Pledge Framework via Depositories

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  • Last Updated on 8 February, 2026

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SEBI pledge framework

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:
    1. Consistent disclosures
    2. Clear allocation of rights and responsibilities
    3. Reduced scope for disputes and ambiguity

4. Implementation Timeline

  • 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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Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied