NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Introduction to Securities Broking Operations
A broker's client sold shares on Monday under a T+1 rolling settlement, and the broker received the sale proceeds from the clearing corporation on Tuesday. Subject to SEBI's norms on running account settlement, which statement is correct about the broker's obligation to pay the client?
The broker must settle the client's funds according to the client's running account authorisation and perform actual settlement of funds periodically within the cycle SEBI prescribes. It cannot keep the money indefinitely or divert it to an exchange fund. Authorisation governs how balances may be retained.
- AThe broker must settle the client's funds as per the client's running account authorisation, with actual settlement at least once in the specified periodic cycleCorrect
- BThe broker may retain the funds indefinitely without any client authorisation
- CThe broker must pay only after one year
- DThe broker must transfer the funds to the exchange's investor fund
Explanation
Brokers hold client funds only as permitted by the client's running account authorisation, and must carry out actual settlement of funds and securities periodically as prescribed by SEBI. Retaining funds indefinitely or sending them to the exchange's fund is not permitted.
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