SEBI Proposes Norms to Prevent Brokers from Retaining Investors’ Funds at End of Trading Day
Last Updated: February 07, 2023, 14:18 IST
The move is aimed at ensuring the safety of investors’ money lying with brokers and ‘clearing’ members.
Securities and Exchange Board of India (SEBI) has taken a big step to eliminate the possibility of misuse of investors’ money by financial brokers.
The Securities and Exchange Board of India (SEBI), the regulatory body that monitors the activities of the stock market, has taken a big step to eliminate the possibility of misuse of investors’ money by financial brokers. SEBI has proposed to prohibit trading members and ‘clearing’ members from holding investor money till the end of the day and return the entire amount to the clearing corporation on the same day.
In the current system, when an investor places money with a broker, a part of it is kept by the broker and a part is with the Indian Clearing Corporation Limited member. And now, SEBI has proposed in a consultation paper to transfer all investor money lying with stock brokers and clearing members to the Clearing Corporation daily.
The move is aimed at ensuring the safety of investors’ money lying with brokers and ‘clearing’ members. SEBI said, “Several steps have been taken to protect the securities and funds of the investors. But there may be apprehensions of misappropriation of investors’ funds lying with the stock broker and ‘clearing’ members.”
Giving examples, SEBI said that as on January 6, under daily account settlement, about Rs 46,000 crore of investors were lying with brokers and ‘clearing’ members. It is also worth noting that the country’s 1,355 stockbrokers are not subject to all regulatory safeguards. SEBI has sought suggestions from people on the proposal by February 17.
Let us tell you that some incidents wherein the brokers misused investors’ money had come to light. After these matters came to the fore, SEBI showed strictness and took several tough decisions keeping in mind the protection of the interests of the investors.
In a consultation paper, SEBI said that a proposal will be mandated with the introduction of a blocking of funds facility for trading in secondary markets which will prevent misuse of client funds, brokers’ defaults and the consequent risk to investors’ capital.
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