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April 7, 2001
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Money > Business Headlines > Report April 7, 2001 |
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Sebi may split pool accountSavio Pinto The Securities and Exchange Board of India is considering splitting the pool account of brokers so that funds received on account of vyaj badla (badla finance) are kept in a separate account. This is to prevent the clubbing of these funds with the broker's normal settlement account. Recent instances of misuse of vyaj badla funds deposited by investors to fulfil the normal settlement obligations of brokers have been the trigger point for such a move. Senior Sebi sources said "such a move would prevent the misuse of funds received by the brokers since the funds would be held in a different account. This would eliminate any scope for interlinking of accounts. It would also create another level of monitoring and would be a further step in enhancing risk containment measures." Although the crisis in the market has engulfed several brokers, the net settlement to the exchange has got fulfilled due to the appropriation of funds - received from retail investors - which were to be deployed in the badla market. Currently only the shares received as collateral against vyaj badla funds are retained in a separate account by the exchange. These shares hence cannot be used by brokers for any other transactions. This system introduced by Sebi a few years back when the badla system was modified curbed the practice where vyaj badla financiers who kept the shares at their end would reintroduce the shares in the market. The deployment of funds in the badla market had become quite a popular practice with many large broking houses catering to retail investors for deployment of funds in this segment of the stock market. Enamoured by the higher rate of interest received on funds used in this system than what would normally have been received through fixed income products, many small investors had opted for this mode of investment. However many of them have been left in the lurch when they did not receive their funds back on demand. This had highlighted the need for greater monitoring of these funds at the exchange level. The measures being contemplated for introduction would hopefully help in curbing these practices. Powered by ALSO READ:
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