NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Risk Management
Under the SEBI framework on upfront collection of margins, which statement is correct for a client's purchase of shares in the cash market?
Margins must be collected from clients upfront, and any short or non-collection attracts penalty under the SEBI framework. It is not deferred to day end, not waived for delivery purchases, and not limited to institutional clients.
- AThe broker may collect margins at the end of the settlement day
- BThe margin must be collected from the client upfront, and short or non-collection attracts penaltyCorrect
- CMargin is never needed for delivery-based purchases
- DMargin is collected only from institutional clients
Explanation
SEBI's framework requires clearing members to collect margins upfront from clients and report them, with shortfalls attracting penalties. It applies to client positions generally, not merely institutions, and not only at the end of the day. Hence only the upfront collection statement is correct.
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