The Hindu Business Line : Brokers to attract penalty for misuse of clients’ collateral

Mumbai, April 17 Misuse of collateral, deposited by clients with the broker, would attract penalty said the capital market regulator, SEBI, in a circular issued on Thursday.

“In case the client collateral is found to be mis-utilised, the broker would attract appropriate deterrent penalty for violation of norms under Securities Contract Regulation Act,” a SEBI circular addressed to all stock exchanges said.

The brokers have been further directed by SEBI to issue a daily statement of collateral utilisation to clients, which shall include details of collateral deposited, collateral utilised and collateral status with break up — in terms of cash, fixed deposit receipts, bank guarantee and securities.

“Brokers should have adequate systems and procedures in place to ensure that client collateral is not used for any purposes other than meeting the respective client’s margin requirements or pay- ins,” SEBI said.

Brokers have also been directed to maintain records to ensure proper audit trail of use of client collateral so that they are able to produce it during inspection, SEBI said.

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