Client Unpaid Securities Pledgee Account
Also written CUSPA
A separate account a TM/CM opens, in whose favour an auto-pledge marked "unpaid" is created when pay-out securities go to a client who has not paid for them.
In plain language
A broker is not allowed to keep a client's securities in its own accounts. So what happens when a client buys shares but does not pay for them?
The broker cannot simply hold on to the shares. Instead, the securities received in pay-out are transferred to the client's own demat account, and an auto-pledge, created without any instruction from the client, is marked on them with the reason "unpaid". The pledge is in favour of a separate account the trading member or clearing member opens for the purpose: the Client Unpaid Securities Pledgee Account (CUSPA).
The client sees the shares in his own account but cannot freely use them. The broker has a pledge that protects its money. If the client pays, the pledge is released. If not, the broker can sell.
How it works
From Chapter 8 (Handling of clients' securities by TM/CM), with Chapters 4 and 9.
Why it exists. The Securities Contracts (Regulation) Act, 1956 and the SEBI (Stock-Brokers) Regulations, 1992 require brokers to segregate clients' securities and money and not use them for themselves or other clients. TMs/CMs must transfer securities received in pay-out to the client's demat account within one working day.
The timeline:
| Stage | Rule |
|---|---|
| Pay-out, client unpaid | Securities go to the client's account, followed by an auto-pledge with reason "unpaid" in favour of the CUSPA |
| After pledge creation | TM/CM sends an email/SMS telling the client about the funds obligation and its right to sell |
| Client pays within 5 trading days of pay-out | TM/CM can release the pledge; securities become free balance |
| Client does not pay | TM/CM sells the securities in the market within 5 trading days after pay-out, with one trading day's prior intimation by email/SMS |
| Sale | Done under the client's Unique Client Code; profit or loss is transferred to or adjusted from the client's account |
| Invocation | Only against the client's delivery obligation; securities are blocked for early pay-in in the client's account, with a trail in the CUSPA; depositories verify the block against the client-level obligation |
| Neither invoked nor released within 7 trading days | Pledge auto-released; securities become free balance without encumbrance |
Margin. Unpaid securities pledged this way are not counted towards the client's margin obligations.
Pledge release for early pay-in. If a client sells securities that carry a CUSPA pledge, depositories provide a single instruction, "pledge release for early pay-in", to the TM/CM. The pledge is released and an early pay-in is set up immediately, only to the extent of the client's delivery obligation, with no physical or electronic instruction or DDPI/POA needed. The workbook ties this to SEBI's circular of June 3, 2025.
Account tagging (Chapter 4). In the table of demat account categories for stock brokers, the CUSPA's purpose is to hold unpaid securities of clients.
A worked example
Illustrative client and prices; the day limits are the workbook's.
Sanjay buys 500 shares at Rs 900 on Monday (trade value Rs 4,50,000). Pay-out is on Tuesday. He does not pay his broker.
| Day (trading days after pay-out) | What happens |
|---|---|
| Tuesday (pay-out) | 500 shares credited to Sanjay's own demat account, then auto-pledged as "unpaid" in favour of the broker's CUSPA. Broker emails and SMSes him |
| Up to day 5 | If Sanjay pays Rs 4,50,000, the broker releases the pledge and the shares become free |
| He doesn't pay | Broker gives one trading day's notice, then sells within 5 trading days of pay-out, under Sanjay's UCC |
The sale. The broker sells all 500 at Rs 860: 500 x 860 = Rs 4,30,000.
- Shortfall against what he owed: 4,50,000 − 4,30,000 = Rs 20,000 loss.
- That Rs 20,000 is adjusted from Sanjay's account with the broker.
Invocation mechanics. When the pledge is invoked for this sale, the 500 shares are blocked for early pay-in in Sanjay's account, with the trail kept in the CUSPA. The depository checks that the block matches his delivery obligation.
If the broker had done nothing. Had the pledge been neither invoked nor released within 7 trading days of pay-out, it would have been auto-released, and Sanjay would hold 500 free shares.
Margin. While pledged, the 500 shares worth Rs 4,50,000 do not count towards Sanjay's margin.
Why NISM asks about it
Chapter 8 (Functions of DP - Trading and Settlement, 13% weightage, the heaviest chapter) sets out the auto-pledge, the 5- and 7-trading-day limits, sale under UCC and the margin exclusion. Chapter 9 (10%) covers the "pledge release for early pay-in" single instruction for CUSPA pledges, which the Chapter 13 annexure repeats. Chapter 4 (12%) lists the CUSPA among stock-broker demat account categories. Expect questions on the day limits, who creates the pledge, and whether unpaid securities count as margin.
Common exam traps
- Securities go to the client's account first, and are then pledged. The broker does not keep them in its own account.
- Auto-pledge, created without any instruction from the client, with reason "unpaid".
- 5 trading days to pay (or for the broker to sell). 7 trading days before auto-release if the pledge is neither invoked nor released.
- One trading day's notice before the sale.
- Sold under the client's UCC, not the broker's proprietary code; profit or loss goes to the client's account.
- Invocation only against the delivery obligation, and securities are blocked for early pay-in in the client's own account.
- Not margin. Unpaid pledged securities are not considered for the client's margin obligations.
- Pay-out to client within one working day is a separate, earlier rule, and uses working days, not trading days.
- Two account names in the tagging table. Chapter 4 lists both a "Client Unpaid Securities Account" and the CUSPA with the same purpose, linked by an asterisk. The process in Chapter 8 uses the CUSPA.
Where this is taught
Free preparation for NISM Series IVRelated terms
- Demat Debit and Pledge InstructionA limited, optional authorisation letting the broker (or broker-DP) debit a client's demat account only for settlement delivery, margin pledges, exchange MF orders and open-offer tenders - in place of a PoA.
- Margin pledgeThe only permitted way for a client to give securities as margin — a special pledge created in the depository system that leaves the shares in the client's own demat account instead of transferring them to the broker.
- Unique Client CodeThe single code a broker assigns to a client once KYC is complete, mapped to that client's PAN and demat account, under which every one of the client's orders must be entered on the exchange.
- Early pay inDelivering securities to the clearing corporation's early pay-in account ahead of the pay-in deadline, mainly to earn margin exemption; now usually done by blocking shares in the client's own demat account.
- PledgeA charge created over demat securities in favour of a lender who may appropriate them unilaterally on default — created by book entry under section 12 of the Depositories Act, not by handing over anything.
- Clearing member accountThe special demat account a broker or custodian opens to settle exchange trades, through which clients' sold shares go to the clearing corporation and bought shares arrive; also called the pool account.
- Pledge release for early pay-inA single-instruction functionality that releases a client's margin-pledged or CUSPA-pledged securities and sets up early pay-in for them immediately, when the client sells shares already pledged as margin.
- Client Securities Margin Pledge AccountA dedicated demat account a Trading or Clearing Member opens to accept client securities as margin by way of pledge, the only route permitted since 1 August 2020, replacing title-transfer collateral arrangements.
- Pay-outThe leg of settlement in which the clearing corporation releases what members are owed: funds credited to their clearing bank accounts, and securities now credited directly to the client's demat account.