Sebi’s online system to detect misuse of clients’ securities by brokers

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Published: February 14, 2020 12:35:58 AM

According to the regulator, it has been observed that some brokers have misused clients’ securities received as collateral to meet their own settlement obligation or obligations of other clients.

Some brokers have also misused clients’ securities by pledging them with banks and NBFCs to raise funds for their own use.Some brokers have also misused clients’ securities by pledging them with banks and NBFCs to raise funds for their own use.

Sebi on Thursday said it has developed an online system for detecting misuse of clients’ securities by brokers. The system is likely to timely detect misuse of clients’ securities collected by brokers as collateral or received in pay-out of securities.

Sebi in a press release said, “Sebi collects the details of the clients’ securities submitted in weekly report filed by brokers with the exchanges and updates the same with trades conducted in the accounts of said clients using the data available with Sebi in DWBIS as well as data provided by exchanges, clearing corporations and depositories pertaining to auction trades, corporate actions, SLBM transfers, off market trades etc.

“The securities holding balance computed is matched with actual clients’ securities holding in the demat account and submission made by the broker for the next day.”

If there is any mismatch in data, it is flagged as an alert for exchanges.

According to the regulator, it has been observed that some brokers have misused clients’ securities received as collateral to meet their own settlement obligation or obligations of other clients. Some brokers have also misused clients’ securities by pledging them with banks and NBFCs to raise funds for their own use.

Earlier, the markets regulator has taken a number of policy measures like laying down the early warning mechanism to detect diversion of clients’ funds and securities, restricting broker to pledge clients’ securities even with the consent of the clients to prevent the misuse of clients’ securities by brokers.

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