Hey, firstly apologies for the kind of experience you’ve had with the customer support team. Those are not the usual standards we’re known for, we’ve escalated the matter internally and will take necessary actions.
With regard to the query you’ve raised, here’s a detailed explanation:
SEBI mandated the collection of upfront margins in the Equity segment from the 1st of September 2020, this meant that if someone did not bring in adequate margins, a penalty would be levied. While this didn’t have an impact on purchase trades (since we would ask for 100% of the purchase value upfront), we did have to change the way we settle sell trades. We had two options:
(a) Ask the client to bring in money if they wanted to sell stock (20% of the value)
(b) Debit stocks the day that the sale was made and do an Early Payin (EPI) to the Exchange, which gave two benefits:
(i) the need for upfront margin wasn't required (as stated in point a above)
(ii) the credit from sale could be allowed to carry out other trades
We opted for (b) and this is the reason it’s imperative that we debit the stock on the same day.
Coming to the specific issue you’ve raised: When we debit stock, we don’t keep it with us, we move it to an ‘Early Payin’ demat account maintained with the Clearing Corporation (CC). Because the stocks are in their possession and thus the risk of default is covered, the CC & the Exchanges give us the benefit as explained in point b (i) and (ii) above. When a Corporate action (CA) is announced on a scrip which is lying in the EPI account, the beneficiary of the CA is also the holder of the said demat account - the CC. So the Rights Entitlement get credited to this account under a temporary frozen ISIN. When the ISIN is frozen, they can’t be transferred out.
Source: https://www.bseindia.com/downloads1/FAQs_on_Rights_Entilement_Trading.pdf
The day the ISIN is activated (the listing day), is when the CC is required to credit these shares from the EPI account to the Broker Pool account, the broker is then required to transfer them to the respective clients.
In the said cases, there have been delays from the CCs side in crediting these shares to the Broker. While I’m not pinning the blame on anybody, we have escalated the matter to CC too. But at times, there are things that are beyond our control. In the case of Deepak Fertilizer, we’ve been following up with CC from the 28th, but were given credit only on the 30th, this delayed the onward credit to clients.
Does that mean investors lose out?
Absolutely no. To counter this we will escalate the matter to the CCs right away and get them to credit the units on the listing day, before market hours. This way, the units will be shown to the client on the same day prior to listing which they’re free to trade.
Additionally, the depositories are also working on a model whereby instead of debiting, the stocks can be irreversibly earmarked for payin. This way, the stocks will continue to vest in the investor’s account and will be debited on the day of payin and thus the corporate action benefit will come directly to the investor’s account. This is likely to get done by the start of the next year.
Also, this issue isn’t limited to Zerodha. This is with all brokers who are debiting shares on T day and moving them to EPI.