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

Under SEBI's framework on clients' funds and securities, how must a stock broker handle the funds received from clients?

Client funds must be kept in a separate designated client bank account and not mixed with the broker's own money. Using them for proprietary trading or for other clients is prohibited because client assets must be protected and segregated.

  1. AUse them for proprietary trading if the client is inactive
  2. BKeep them in a separate client bank account and not mix them with the broker's own fundsCorrect
  3. CDeposit them in the broker's own account for operational convenience
  4. DLend them to other clients for margin funding

Explanation

Client money must be segregated in designated client bank accounts and cannot be mixed with the broker's own funds. Using one client's funds for proprietary trading or for another client is prohibited.

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