A new rule in India’s stock markets, where brokers are supposed to transfer unused funds back to the client accounts at least once each quarter, has revealed a big mismatch of funds. The accounts settlement process was kicked in recently, as mandated by market regulator SEBI.
During the exercise, it was revealed that while brokers withdrew anywhere between Rs 16,500 crore and Rs 20,000 crore from the clearing corporation (CCs) of stock exchanges, the actual amount they returned to the clients stood somewhere around Rs 25,000-30,000 crore.
SEBI is against brokers’ collecting excess collateral from clients. In July, SEBI said it had devised the “framework to mitigate the risk of misuse of client funds”. For this reason, SEBI had directed brokers to separate the money of each client and not club it in a pool account.
A regulatory official said the mismatch could lead to further tightening of norms by SEBI to restrict broker handling of client money. However, a large retail broker said the mismatch could be mainly because brokers had started returning client money before the process date and hence may not have deposited with the CCs.
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