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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' securities, a trading member that receives client securities as margin must handle them in which manner?

The broker must take client securities as margin through the depository's margin pledge process, with the client retaining ownership, and then re-pledge them to the clearing member. Moving them to the broker's own account or using them for its own borrowing is prohibited.

  1. APledge them with the broker's own bank to raise funds
  2. BCreate a margin pledge in favour of the trading member through the depository system and then re-pledge to the clearing member, without taking title transfer to the brokerCorrect
  3. CTransfer the securities into the broker's proprietary demat account
  4. DHold them in a physical register in the broker's office

Explanation

Securities collected as margin must be pledged through the depository's margin pledge mechanism, with the client retaining ownership. Re-pledge to the clearing member is permitted for exchange margin, while transferring them to the broker's own account or using them for own funding is prohibited.

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