NSE said some of the members were not adhering to the requirement of settling client accounts once a month or a quarter, as desired by the investor
The National Stock Exchange (NSE) said following an inspection, it came across some 'serious liquidity concerns' in case of certain brokers. The Exchange conducted routine inspection of actual settlement of client accounts, but said this time there were large number of complaints against some members from investor for non-receipt of funds and securities.
Without disclosing the names of the concerned brokers, the NSE, in a circular (Ref.No. 223/2015)
issued to all members said that some of them were not adhering to the requirement of settling client accounts once a month or a quarter, as desired by the investor.
“It is also observed that the funds available with the Member were reported to be short of the amount payable to the clients as per the settlement cycle, which indicates serious liquidity concerns,” the Exchange said, while warning the brokers of serious action for lapses on their part.
“In the recent past, the Exchange has also received large number of investor complaints for non-receipt of funds and securities against some Members,” it added.
As per SEBI guidelines for Settlement of Client Accounts, the Exchange regulations require “clear segregation between client funds and securities with that of the Member and the permissible purposes for which the funds and securities can be transferred from client accounts.
The brokers are also required to settle the client accounts once a month or a quarter, as per the consent obtained from the client.
“Members may appreciate that the facility of running account is provided for operational convenience and should be used responsibly and judiciously. However, it is observed during Exchange-conducted inspections and the half yearly internal audits conducted by member-appointed Internal Auditors that some Members are not diligently adhering to the requirement of settling client accounts once a month or quarter as per the consent of client,” the NSE circular said.
The Exchange has asked its members to ensure that the funds and securities available in the client accounts, together with balances available with the clearing member and funds with clearing corporation, are not less than the funds and securities payable to the client at all times.
“Members are also advised to reconcile client beneficiary accounts and the register of securities on a quarterly basis and maintain complete audit trail and documentation of such reconciliation.
“Any discrepancy between amounts, securities payable to clients and the actual balances available in client’s bank and beneficiary accounts together with the balances available with clearing member or clearing corporation and any instance of actual settlement not done shall be viewed very seriously,” NSE said.
The Exchange has directed all members to ensure compliance to this circular.