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NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Other Services Provided by Brokers

A client wishes to use the broker's 'pledge' route to give margin against securities held in demat. Under the current framework for client securities as margin, what is the correct process?

The client creates a margin pledge in favour of the clearing member through the depository and authorises it using an OTP or TPIN. Securities stay in the client's demat account, and are not transferred to the broker's proprietary or pool accounts for margin purposes.

  1. AThe client creates a margin pledge in favour of the broker's clearing member and confirms it via a depository-generated authorisation, such as OTP or TPINCorrect
  2. BThe client transfers the securities to the broker's proprietary demat account
  3. CThe broker obtains a power of attorney and pledges securities to a bank on its own
  4. DThe client sends a signed letter and the broker moves the shares to a pool account

Explanation

Under the margin pledge framework, the client pledges securities in favour of the clearing member through the depository, and the client authorises it with OTP or TPIN. Transfer to proprietary or pool accounts is not allowed for margin, and a POA cannot be used to pledge securities on the broker's own account.

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