Brokers cry foul on transfer of funds
After getting a deadline extended twice, brokers are finally complying with the Securities and Exchange Board of India's call to transfer excess funds from brokerage accounts back into the accounts of their clients but not without raising their concerns. Sandeep Singh reports.business Updated: Aug 25, 2010 00:06 IST
After getting a deadline extended twice, brokers are finally complying with the Securities and Exchange Board of India's call to transfer excess funds from brokerage accounts — estimated to be an aggregate of around R10,000 crore — back into the accounts of their clients but not without raising their concerns.
Cracking the whip
Sebi instructed brokers to transfer funds or securities lying in the credit of the client.
The regulator asked them to settle such accounts at least once in a quarter or month.
The brokers got the deadline extension twice.They have to comply now by September 30.
Sebi had issued a circular to brokers asking them to transfer the funds or securities lying in the credit of the client and settle the funds and securities at least once in a calendar quarter or a month. While the first deadline was March 31, it got extended to June 30 and the brokers now have to comply it by September 30.
"It is a good step and we are already complying with the same and started the process a month ago," said C.J. George, MD and CEO, Geojit BNP Paribas Financial Services.
"I think Sebi should have given an option to customers on who wants their excess money to be transferred on a quarterly basis," said a broker who did not wish to be named.
Experts, however, feel that keeping fund with broker offers convenience to customers but this move is important for traditional brokers, as the customers money gets merged with brokers money and there is no control over how a broker is using it.
However, broking houses that are subsidiaries of banks are not much concerned.
"In our case, customers money does not get transferred into the brokers account and there is a seamless movement of shares and funds," said the head of a broking house that is a subsidiary of a bank.
"It is only in case of some high networth individual customers that we operate from branches where we have to do this exercise and we have already implemented it."
And this is where the traditional brokers are concerned.
"This move is going to benefit the brokers who are subsidiary of banks as movement of funds is a seamless activity for them and will impact the traditional brokers who are not part of a bank," said the head of a large broking firm.