Skip to content

NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Other Services Provided by Brokers

A broker has a client who has not traded for a long period. Under SEBI's rules on running account settlement, which action is correct for the broker regarding the client's credit balance of funds lying with it?

The broker must settle the client's running account at the prescribed periodic frequency and return the credit balance, in line with the client's authorisation. It cannot retain it indefinitely, book it as income or use it for proprietary positions.

  1. ARetain the balance indefinitely as the client has not asked for it
  2. BSettle the client's funds and securities periodically as per the client's running account authorisation and prescribed frequency, returning the balance on settlementCorrect
  3. CTransfer the balance to the broker's own income account after one year
  4. DInvest the balance in the broker's proprietary positions

Explanation

Brokers must settle client running accounts at the prescribed frequency (monthly or quarterly depending on the client's choice) and return unused funds, unless the client has given a valid running account authorisation covering continuation. Retaining, booking as income or using for proprietary positions is not permitted.

Did you get it right without looking?

One question tells you little. A timed set on Other Services Provided by Brokers shows your real accuracy, how long you take and where you lose marks.

Practise Other Services Provided by BrokersFree diagnostic mock

More Other Services Provided by Brokers questions