Sebi mulling new framework to prevent misuse of client collateral
The rules are aimed at identifying each client's collateral and ensuring it is utilised towards the margins of that client only
 "Sebi mulling new framework to prevent misuse of client collateral")
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Market regulator Sebi on Monday proposed a new framework for client collateral segregation and monitoring. The rules are aimed at identifying each client’s collateral and ensuring it is utilised towards the margins of that client only.
“In the past, there have been instances of misuse of client collateral. In such a scenario, not only confidence of investors in market integrity is shaken, but it also brings disrepute to the entire ecosystem of trading,” Sebi said in a discussion paper inviting public comments.
The new framework aims to tackle the issue of misappropriation and misuse of client funds by brokers and also to shield the clients in an event the broker defaults. Sebi has proposed a new reporting mechanism which will provide visibility of client-wise collateral at all level such as the trading member, clearing member and the clearing corporation.
“In the past, there have been instances of misuse of client collateral. In such a scenario, not only confidence of investors in market integrity is shaken, but it also brings disrepute to the entire ecosystem of trading,” Sebi said in a discussion paper inviting public comments.
The new framework aims to tackle the issue of misappropriation and misuse of client funds by brokers and also to shield the clients in an event the broker defaults. Sebi has proposed a new reporting mechanism which will provide visibility of client-wise collateral at all level such as the trading member, clearing member and the clearing corporation.
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