The National Stock Exchange (NSE) today stopped margin funding arrangements outside the purview of its guidelines and the Securities and Exchange Board of India (Sebi) norms. | |
| The move will prevent brokerages from obtaining the power of attorney for operating their clients' accounts in ways that violate the rules. |
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| Observers, however, say loopholes still remain as such funding can still be done via the non-banking financial companies (NBFCs) registered with the Reserve Bank of India (RBI), which exist within the fold of most brokerages. |
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| Gagan Banga, executive director, India Bulls, said the company was already compliant with the circular on margin funding issued in December last year. |
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| An executive with a top brokerage, who did not wish to be quoted, said his firm was also complying with the new notification. With the new circular coming into effect, trading members will not be able to get into any arrangement with their clients that violates the margin funding norms. |
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| They will not be allowed to obtain any authorisation or power of attorney for operating the accounts of their clients, who avail of the financing facility for trading and confer rights for operation of such accounts to the trading members. |
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| Amit Majumdar, head of operations, Angel Broking, said, "From now on, brokers would not be able to get the power of attorney to operate their clients' accounts outside the purview of the guidelines. |
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| "The new circular curbs one mechanism. There are ways in which it can still be done via the NBFCs affiliated to the brokerages. These NBFCs can have the power of attorney," he added. |
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