NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Risk Management
Under the SEBI framework for client securities, which practice is a stock broker required to follow regarding clients' fully paid securities lying with it?
A stock broker must keep clients' fully paid securities segregated and must not use them for its own obligations or for other clients' obligations. Using them for proprietary funding, other clients' settlement, or transfers to a group company would be misuse of client assets.
- APledge them to raise funds for proprietary trading
- BUse them to meet other clients' settlement obligations
- CNot use them for own or other clients' obligations and keep them segregatedCorrect
- DTransfer them to a group company for safekeeping
Explanation
Client securities must not be misused. A broker cannot use one client's securities for its own or another client's obligation, and must keep client assets segregated, with pledge only through the prescribed margin pledge mechanism for that client's own obligations.
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