Brokers Object to Sebi's New Net-Worth Formula
· Business · LiveMint, Moneycontrol
Stockbrokers have approached Sebi to object to a proposed rule requiring them to hold extra capital based on client money they no longer keep with them. Sebi's consultation paper issued in April proposes changing the variable net-worth cushion from 10% of average daily cash balance held by brokers to 10% of clients' average credit balance over six months plus an extra amount based on active clients. Brokers argue the new formula does not reflect reality since 2023, when they were required to route nearly all client funds directly to clearing corporations by the end of each trading day. They say calculating capital requirements on a broader client-balance figure could force them to set aside capital against funds already moved out of their hands. The issue was discussed in the Intermediary Advisory Committee meeting on September 11, according to sources. An emailed query to Sebi did not elicit a response.
Why it matters
Brokers may need to raise additional capital if the rule is implemented, increasing their operational costs. The change could affect how brokers manage client funds and their compliance burden under Sebi's regulatory framework.
Read the original report — LiveMint
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