The business of brokers is widely spread in the country. Brokers earn money in different ways. One of these ways is to give bank guarantee on the money of the customers.
Brokers make a lot of money by giving bank guarantees on clients’ money. In such a situation, many times the money of the customers is also misused by the brokers. In view of this, recently SEBI has taken a big step. The Securities and Exchange Board of India (SEBI) has recently ordered that brokers will no longer be able to use clients’ money to give bank guarantees.
When will the ban take place?
According to SEBI’s order, there will be a ban from the beginning of next month i.e. from May 1, 2023, on the use of brokers’ clients’ money for giving bank guarantees. Not only this, as per SEBI’s order, all the existing guarantees given on the money of the customers will be canceled by 30 September.
Customers’ money will be saved from risk
SEBI has issued this order to protect customers’ money from risk and prevent its misuse. Stock market is risky in nature. In such a situation, the bank guarantee given by the brokers on the money of the customers puts their money at risk. Also there is a possibility of its misuse.
At present, brokers and other intermediaries pledge clients’ money with banks, which in turn give guarantees to clear clearing corporations for large amounts. This puts the money of the customers at risk. SEBI’s order will remove this risk.
Monitoring will now happen
SEBI in its order has asked stock exchanges and clearing corporations to systematically monitor closure of bank guarantees given by brokers on clients’ money.
