To prevent misuse of accounts, market regulator Sebi today proposed that brokers should send monthly statements on securities and funds to their clients.
"...The broker should send all the clients a monthly statement... The retention of funds/securities, if any, by the broker should be duly explained in the statement," Sebi said framing proposed guidelines for client registration and trading operations.
Further, Sebi said in the case of any dispute arising out of the settlement, the client should bring it to the notice of the broker within seven working days of receiving the statement.
If the client requests for return of securities or funds lying to his credit with the broker, at any time within these seven days, the same shall be transferred by the broker within one working day from the date of receipt of the request.
Commenting on the proposal, SMC Capitals Equity Head Jagannadham Thunuguntla said, "The move is encouraging and it will bring transparency to the system. It will increase the clients' confidence to trade more efficiently."
The market regulator said that comments are invited from the public on the proposal up to August 15, 2009.
Sebi further said the 'running account authorisation' should be dated and the clients can ask for their money any time.
In running account authorisation, the clients authorise the broker to run their accounts.
The regulator also said that actual settlement of funds and securities should be done by both the parties, on the last day of every calendar month.
However, some clients may be having outstanding transactions or positions in cash and derivative on the running account settlement date.
"In such cases, the broker may make due adjustment by retaining the requisite securities/funds from the running account towards such obligations of clients," it said.
Sebi further said that the practice of creating email ids by the broker may be discontinued.
"The authorization for receiving Electronic Contract Notes (ECN) should be signed by the client only and not by any authorised entity or attorney holder," it added.
The market regulator said it was observed that the funds and securities of the clients lying with the brokers were prone to several risks and brokers were misusing them.
"Most brokers are forcing clients to opt for ECN and are also creating email ids instead of using the email ids created and provided by the clients," it said.
There are concerns regarding actual receipt of e-mail id and password by clients, Sebi added.
