To map defaulting stock brokers, the Securities and Exchange Board of India (Sebi) wants brokerages to disclose trading account details of each client on a weekly basis to the exchanges.
Broking houses hold a huge pool of client money or shares with them, which collectively runs in several hundreds of crores. But no reporting criteria was followed till now for individual client accounts. Instead, the money or shares were used to fulfil margin requirements for derivatives in propriety account or provide short-term funding to other traders.
A Sebi official said it gets several complaints from participants for non-refund of their money from brokers and the new reporting could map such defaulters. Recently, Sebi found that brokers who defaulted on their payment to exchanges had not paid to clients too even if money was lying in pool account.
The official said that Sebi was also asking brokers to maintain separate pools for propriety trading and client accounts.
Brokers were allowed to retain client money or shares in trading accounts on obtaining written consent for ease of operations. The system acts like pre-paid service in derivative segment and clients can take instant positions without waiting till the transfer of funds or shares that could take a day or two. However, brokers have to settle client accounts once every quarter.
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