You may have received the notice “Your Stock Broker Reported Your Fund Balance” on many occasions if you have a demat and trading account.
Along with the monthly updated details of funds and securities, these notifications are sent by NSE, BSE, and MCX. Under SEBI’s direction, this is a novel project. I’m sure you were curious about the meaning of these messages.
The goal of this article is to clarify the terms “fund balance” and “security balance,” as well as the differences between the two in a broker’s account.
Difference Between Fund Balance and Security Balance
Whatever money you have in the market, the money available in cash (in Account) which you can use immediately is called fund balance and the money with which you have invested in any company is called security balance.
What is a fund balance?
- Fund Balance in the market represents the current cash worth.
- The total revenue for a client less the total expenses is the fund balance. The remaining fund balance may be applied to other projects in subsequent years.
- The amount of money that is now in the broker’s account and belongs to the client (you) is called a fund balance.
What is a Securities balance?
- People can invest in securities such as debt-preferred stocks and equity-preferred stocks and more that are available on the market.
- Securities are the various types of stocks that are available.
- Similar to this, a security balance is the total amount of shares that may be in the broker’s Demat account and are owned by the client, or you.
Fund Balance VS Securities Balance
Funds and Securities balance refers to the amount of money that is in the broker’s account on your behalf, not the amount that is in your trading or demat account.
If a customer has any outstanding debts to the stockbroker, the stockbroker may be able to pledge the securities the client owns.
Following the following guidelines, a broker is permitted to remove assets or cash from a client’s account for statutory obligations, funding shortages, and brokerage amount recovery:
- It is against the law for stock brokers to misuse their clients’ money and securities for personal gain.
- It is not possible to pledge without the clients’ consent
- Securities pledged by the broker cannot exceed the ledger’s value of the client’s debit balance
- Only clients with balances in their ledgers are eligible to pledge
- For the pledge to be completed, the broker must deliver the client the statement.
Even though you do have shares in your Demat account, why does the balance shown on the message seem to be zero?
This is so because the balance shown here is what your stock broker has in their accounts.
The balance of equity displayed here is what is, for whatever reason, held in the broker’s beneficiary account rather than what is yours.
Why the new SEBI initiative?
Do you know, however, why SEBI launched this initiative?
Perhaps you’re wondering what should happen to the balance in the broker’s Demat account. However, it is very important because it represents your money and any securities that may be kept in the broker’s account.
This step was made to prevent brokers from engaging in any form of misconduct.
Should you lack funds or assets that are already committed, a broker may utilize them for personal gain without your knowledge or consent.
Since SEBI’s “Enhanced Supervision of Stock Brokers and Depository Participants” provisions went into effect, the NSE and BSE stock exchanges are now obligated to provide this data to their clients in the interest of transparency. This makes it less likely that brokers will act improperly without informing their clients.
Conclusion
The purpose and operation of the money and securities balance must be understood.
It’s critical to comprehend your trades, investments, and the locations in which you are placing your hard-earned cash.
There are many expenses that you ought to be aware of. For any trader or investor, it is essential to regularly inspect and manage your holdings.
The goal of these initiatives by the SEBI and other relevant regulatory organizations is to prevent malpractices by increasing transparency between investors and brokers.
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