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NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Introduction to Securities Broking Operations

A broker receives a client's cheque towards pay-in but the client's name on the cheque differs from the name in the broker's records, the cheque being from a third party's account. What is the correct operational treatment under exchange and SEBI norms on fund receipts?

The broker should not treat it as a valid client receipt unless the source is properly established, because third-party funds are generally not accepted. Funds should come from the client's own verified bank account to guard against money laundering and misuse.

  1. AAccept it, since only the amount matters for ledger credit
  2. BAccept it only if the client informs the broker by phone
  3. CAccept it if the third party is a relative and the client confirms in writing
  4. DNot treat it as a valid receipt from the client unless the source is properly established, as third-party funds are generally not acceptedCorrect

Explanation

Brokers are expected to receive funds from the client's own verified bank account and to avoid third-party transfers, since these raise money laundering and misuse risks. Phone confirmation or a written relative claim does not make a third-party payment a normal client receipt.

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