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

A broker's client has a cash-segment margin shortfall at the end of the day. Which statement best reflects the regulatory approach to collecting such shortfall from clients?

Margin shortfalls attract penalties on the member at the clearing corporation level, and the broker must collect the required margin from the client as per the rules. There is no waiver for long-standing clients or for small amounts, and reporting is not annual.

  1. AShortfall is ignored if the client is a long-standing customer
  2. BShortfall in client margin attracts penalty at the clearing corporation level and the broker must collect it from the client as per rulesCorrect
  3. CShortfall is automatically waived if it is below Rs 1 crore
  4. DShortfall is only reported to the client once a year

Explanation

Clearing corporations levy penalties on members for margin shortfalls, and the broker is expected to collect margins from clients within the prescribed norms. There is no waiver for long-standing clients or arbitrary amounts, and annual reporting would not be adequate.

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