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

A broker receives funds from a client for trading. As per the SEBI norms on client funds, what is the broker's obligation regarding such money?

The broker must hold client money in a separate designated client bank account and must not mix it with its own funds or use it for proprietary trading or other unauthorised purposes. Segregation protects client assets if the broker faces financial difficulty.

  1. AUse it for the broker's own proprietary trades if the client is inactive
  2. BKeep client funds in a separate client bank account and not mix them with the broker's own fundsCorrect
  3. CDeposit it in the broker's own current account for convenience
  4. DInvest it in mutual funds for the client without instruction

Explanation

Client money must be kept segregated in designated client bank accounts and cannot be mixed with the broker's own funds or used for proprietary purposes. Use for proprietary trades or unauthorised investment is a violation.

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