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

A client of a trading member has a ledger credit balance with the broker and is not trading. As per SEBI's norms on running account settlement, which statement is correct?

The broker must settle the client's funds and securities periodically at the frequency prescribed by SEBI and the client's running account authorisation. Holding credit balances indefinitely, waiting for account closure, or waiting for client reminders is not permitted under the norms.

  1. AThe broker may retain the funds indefinitely without any settlement
  2. BThe broker must settle the client's funds and securities periodically as per the client's running account authorisation and SEBI's prescribed frequencyCorrect
  3. CSettlement is required only when the client closes the trading account
  4. DThe broker must settle only if the client sends a written reminder each time

Explanation

SEBI requires brokers to settle client funds and securities at prescribed periodic intervals (monthly or quarterly depending on the client's choice and rules), even when running account authorisation exists. Indefinite retention is not permitted, and the broker cannot wait for reminders.

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