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NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Market Participants in the Securities Market

Under SEBI's framework for stockbrokers, which statement about client funds and securities is correct?

A broker must keep client funds in a separate client bank account, distinct from its own money. Misusing one client's funds or securities for another client or for the broker's own purposes is prohibited under SEBI rules.

  1. AA broker may use one client's securities to meet another client's pay-in obligation
  2. BA broker must keep client funds in a separate client bank account, distinct from its own fundsCorrect
  3. CA broker may pledge client securities for its own proprietary borrowing if the client verbally agrees
  4. DA broker may retain client credit balances indefinitely without settlement

Explanation

Client money must be segregated in designated client bank accounts and kept apart from the broker's own funds. Using one client's assets for another or for proprietary use is prohibited, and verbal consent is not valid authority. Funds must be settled periodically as per SEBI's running account norms.

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