Don’t Leave Unutilised Funds In Your Trading Account

The Securities Exchange Board Of India has many rules which attract fine on brokers for several reasons. Fund utilization for personal usage is one of those reasons. Recently, the market watchdog (SEBI) fined Mumbai’s broker Anand Rathi, for transferring a client’s Rs 1,00,000 into his account.

Mr.Rathi has performed this act multiple times and therefore was fined for the same. This violated stockbroker norms framed by SEBI. As per SEBI’s rule, the stockbroker is supposed to segregate the client’s money and personal money. The stockbroker needs to open a new bank account with the title of the account stating “broker-client account”.

Having said that, the broker can transfer funds from the client’s account to their account for business purposes such as payment to exchanges, payment for securities transaction tax (STT), or many more.

The broker has full access to your money, but SEBI does not want the broker to use those funds for personal consumption. Therefore, SEBI came up with these rules and regulations. To protect investors’ interests.

Keeping Unused Money In The Trading Account

If you transfer the money to an online trading account and do not use it for a few weeks or months. The stockbroker could misuse those funds. To save investors from this mishap, SEBI ruled out a new regulation.

SEBI stated that unused funds in the trading account had to be returned to the investor. That is, if the funds are not used for 30-90 days (whatever the investor decides at the time of account opening) and are kept unused, they will be deposited back into the investor’s bank account.

Keeping Securities For Longer-Time Is Riskier Than Funds

This is for those investors who are in this game to invest for the long-term. Sometimes keeping financial securities with a broker for a very long time is also a risk. The risk of keeping financial securities is much higher than keeping funds.

The broker can use those financial securities to borrow and also, to sell if needed. It is riskier to keep financial securities than to keep funds in the trading account. This broker can take advantage of those financial securities if they are kept for a very long term.

This does not mean that the investors should not invest for the long term. Investors should choose a trusted broker. The broker is an important part of the financial journey. It can make your financial wealth-building process very simple and easy.

Investors should also know that SEBI is keeping an eye on these brokers. Stockbrokers can not misuse their power and lose their clients ‘ hard-earned money.

Now, stock market beginners generally get confused between a demat and a trading account.

What is a Trading Account?

A trading account is nothing but a platform provided by the stockbroker to their clients. The trading account allows their clients to buy and sell financial securities from all the exchanges. It connects the buyer to the seller and also helps in processing the entire transaction. Trading account overlooks the entire procedure of buying and selling.

What Is A Demat Account?

Demat account is used to store and transfer financial securities from one account to another. There is no limit on the number of financial instruments. Investors can store N number of securities also, there is no limit on the type of asset class. Investors can hold any asset class in the demat account such as equity shares, bonds, or commodities.

 

Latest news
Related news
- Advertisement -spot_img

LEAVE A REPLY

Please enter your comment!
Please enter your name here