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

A broker offers a client the option of running an account on a periodic settlement basis instead of settling every trade. What does the client need to be aware of regarding running account authorisation?

A client can give a written standing instruction for running account settlement and may revoke it at any time. The broker must still settle funds and securities at the prescribed frequency and send statements of accounts, so retaining balances indefinitely is not permitted.

  1. AThe client may give a standing instruction in writing, can revoke it, and the broker must settle funds and securities at the prescribed frequencyCorrect
  2. BThe authorisation is permanent and cannot be revoked
  3. CFunds can be retained by the broker indefinitely without any settlement
  4. DNo statement of accounts needs to be sent to the client

Explanation

Running account settlement requires a client's written standing instruction, which can be revoked at any time. The broker must settle the account at the prescribed frequency and send statements, so the other options are wrong.

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