Sebi bars inter-client transfer of funds

Market regulator Securities and Exchange Board of India (Sebi) today said brokers will not be allowed to use funds from one client's account to buy securities or settle transactions of another client, a move that will instill greater discipline among market intermediaries.

"There shall be no inter-client adjustments for the purpose of settlement of the 'running account'," Sebi said in a circular here.

These conditions, however, will not apply to institutional clients, the regulator said, adding "the existing practice may continue for them."

Sebi further said settlement of funds or securities shall be done within 24 hours of the payout.

It also said client may specifically authorize the stock broker to maintain a running account, provided authorization is renewed at least once a year.

The market regulator further said the authorization shall be signed by the client only and not by any authorised person on his behalf or any holder of the Power of Attorney.

Sebi also said the authorisation shall contain a clause that the client may revoke the authorisation at any time.

Welcoming the move, SMC Capitals' equity head Jagannadham Thunuguntla said: "There has been a continuous move by Sebi to increase the transparency and this step is in that direction."