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

A broker holds client securities in its depository account. Under current SEBI norms on client securities, the broker is permitted to do which of the following with a client's fully paid securities?

A broker may use a client's securities only for that client's own obligations, such as settlement, under the prescribed mechanism. Using them for its own proprietary trading, for other clients, or moving them to its own account amounts to misuse of client assets and is prohibited.

  1. APledge them to raise funds for its own proprietary trading
  2. BUse them for settling the client's own obligations only, without misusing them for other clients or own purposesCorrect
  3. CLend them to another client with a pending delivery
  4. DTransfer them to its own demat account as margin

Explanation

Client securities must be used only for the client's own purposes such as settlement of that client's obligations or margin pledge created through the proper repledge mechanism. Using them for proprietary or other clients' needs is misuse and prohibited.

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