Brokers to pay penalty for not collecting margin

The Securities and Exchange Board of India (Sebi) has asked stock exchanges to penalise brokers for short collection or non-collection of margins in the equity derivatives segments.

The regulator’s move is aimed at resisting payment crises in the wake of high volatility recently. Despite a decline of over 10 per cent in the benchmark equity indices — Sensex of the Bombay Stock Exchange and S&P CNX Nifty of the National Stock Exchange — there has been no payment crisis in the stock markets. One reason for this is that there are no high margins.

Sebi has prescribed several slabs for penalty. For instance, if short or non-collection of margins for a client continued for more than three consecutive days, a penalty of 5 per cent of the shortfall amount would be levied for each day of continued shortfall beyond the third day. Similarly, if the practice continues for five days in a month, the penalty of five per cent of the shortfall amount would be levied for each day, during the month, beyond the fifth day of shortfall, Sebi said.

In all, Sebi has specified five such criteria. “If during inspection it is found that a member has falsely reported the margin collected from clients, the member will be penalized 100 per cent of the falsely reported amount, along with suspension of trading for a day in that segment,” Sebi said.