NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Market Participants in the Securities Market
Under SEBI norms, a stock broker receiving client funds must treat them in which manner?
A stock broker must keep client funds in a separate client bank account, distinct from its own funds. Client money cannot be used for proprietary trading or other broker purposes, as SEBI requires strict segregation to protect investors.
- AUse them for proprietary trading if the client's ledger shows a credit
- BKeep them in a separate client bank account, distinct from the broker's own fundsCorrect
- CDeposit them directly with the depository participant
- DRetain them in the broker's own account but report them monthly
Explanation
SEBI requires brokers to segregate client money from their own funds by holding it in a designated client bank account. Misuse of client funds for proprietary purposes is prohibited, and DPs do not hold broker-received trading funds.
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