Exchanges told to fine brokers for short collection of client margins

Stock market regulator SEBI has directed exchanges to collect penalty from trading members for short collection or non-collection of client margins.

For short collection or non-collections (per client per segment per day) up to Rs one lakh and up to 10 per cent of applicable margin, the penalty would be 0.5 per cent per day and for amounts of Rs one lakh and above and applicable margin of 10 per cent and above, the penalty would be one per cent per day.

If the default continues for more than 3 consecutive days, a penalty of five per cent would be levied on the shortfall amount for each day of continued shortfall beyond the 3rd day of shortfall, said SEBI in a circular that comes into force from September 1.

The same principle would be applicable for cases for more than 5 days in a month.

For short collection caused by a movement of three per cent or more in the index or a currency pair on a given day, the penalty for short collection shall be imposed only if the shortfall continues to the T+2 day.

Non-reporting would amount to 100 per cent short collection and be penalised accordingly while false reporting would result in the member being penalised 100 per cent of the falsely reported amount along with a one day suspension in that segment.

Stock exchanges have been asked to collect the penalty within five days of the last working day of the trading month and credit the proceeds to their own Investor Protection Fund.

SEBI said that it would examine implementation of this circular during inspection of the stock exchanges.

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