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    Question

    To safeguard clients’ funds, SEBI  has come out with

    a framework that requires the upstreaming of all client funds received by stock brokers to clearing corporations. The new framework will come into effect from ________.
    A July 1,2023 Correct Answer Incorrect Answer
    B August 31,2023 Correct Answer Incorrect Answer
    C September 1,2023 Correct Answer Incorrect Answer
    D October 15,2023 Correct Answer Incorrect Answer
    E None of these Correct Answer Incorrect Answer

    Solution

    To safeguard clients’ funds, SEBI  has come out with a framework that requires the upstreaming of all client funds received by stock brokers to clearing corporations.Under the framework, no clients’ funds will be retained by stock brokers on an end-of-day (EoD) basis.    Further, clients’ funds will be upstreamed by stock brokers and clearing members to clearing corporations (CCs) only in the form of either cash, lien (a legal claim or legal right which is made against the assets that are held as collaterals for satisfying a debt ) on Fixed Deposit Receipt (FDR) or pledge of units of mutual fund overnight schemes.    Other than the FDRs (liened to CCs) and mutual fund overnight scheme (pledged to CCs), any remaining client funds with brokers will be upstreamed to a CC before a stipulated cut-off time.The new framework will come into effect from July 1, 2023.    With regards to upstreaming through FDRs created out of clients’ funds, the stock brokers may create FDRs out of clients’ funds only with those banks which satisfy the CC’s exposure norms.    Further, every FDR created out of clients’ funds would necessarily be lien-marked to one of the CCs at all times.   The tenure of such FDRs will not be more than one year and the FDR should be pre-terminable. Besides, the principal amount of the FDR will remain protected throughout the tenure, even after accounting for all possible pre-termination costs.

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