SEBI develops an
online system for detecting misuse of clients’ securities by brokers
Overview:
In the recent past years, 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 the banks and NBFCs
to raise funds for their own use.
The client providing collateral in the form of securities
needs to transfer his securities in the name of the broker and once the
securities move out of the demat account of the client, it is not possible for
him to keep a track of use/ misuse of those securities by the broker.
ONLINE SYSTEM FOR
DETECTING MISUSE:
SEBI has developed an in – house online system by which it
would be able to prepare client level securities holding register of the
brokers. 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
the actual clients’ securities holding in the demat account and submission made
by the broker for the next day. Any mismatch in data is flagged as an alert for
Exchanges.
As such, SEBI has developed the in – house capabilities to
online track the movement of client securities collected by broker as collateral
and raise alerts with Exchanges if diversion of clients’ securities is noticed.
These reports are being generated by SEBI on a weekly basis and three such
mismatch reports have already been forwarded to Exchanges for reconciliation
with members.
This system is likely to timely detect the misuse of clients’ securities
collected by brokers as collateral or received in pay-out of securities.
Link:
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SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM OR ARISING OUT OF OR IN CONNECTION
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