Sebi unveils a framework to segregate and monitor collateral at client level

Mumbai: The Securities and Exchange Board of India (Sebi) has come out with a framework for segregation and monitoring of collateral at client level. The regulator said the move is aimed at strengthening the mechanism of protection of client collateral from misuse and default of brokers.

There has been several instances in the recent past of brokers defaulting and misusing clients securities and funds. Sebi said clearing corporations should specify a reporting mechanism that would provide visibility of client- wise collateral, covering both cash and non- cash, at both the broker and clearing corporation level. The reporting structure should entail disaggregated information both segment-wise and asset type wise break-up of each client collateral.

The regulator said a web portal facility should be provided by the stock exchanges to allow clients to view the disaggregated collateral reporting by brokers.


Sebi also said in the case of bank guarantees, the broker may consider the unfunded portion of the bank guarantee as proprietary collateral. “Any false allocation by members shall be treated as a violation and disciplinary action shall be taken against the members,” Sebi said in a circular on Tuesday.