If you have a Demat account I am pretty sure you would have received “Your Stock Broker Reported Your Fund Balance” SMS and wondered what is it all about. These are SMS sent by Stock exchanges – NSE (from VK-NSESMS, JS-NSESMS etc.) and BSE (from QP-BSELTD, VM-BSELTD etc.) in response to SEBI’s Enhanced Supervision of Stock Brokers/Depository Participants initiative.
In addition to notification by SMS, the stock exchange would send elaborate details by email as well. I have a Demat account with ICICI bank. Every month I get below email from BSE Ltd (firstname.lastname@example.org), along with attachment that contains all details.
"Your Stock Broker ICICI SECURITIES LTD. has reported the
details of Funds balance and Securities balance, securities
pledged, last settlement date and ISIN wise details of
securities as on < date > for UCC – < your Unique Client Code >
to BSE which is attached."
Your Stock Broker Reported Your Fund Balance 0
Now the confusing part. Most of you would have observed the received SMS says balance as zero, even if you have securities held in your Demat account.
"Your Stock Broker reported your fund balance
Rs.0 & securities balance 0 as on < date >. Balances to not
cover your bank, DP & PMS balance with broking entity. Check
details at . If email Id not correct, kindly
update with your broker - National Stock Exchange"
Fund and securities balance reported here is not what is held in your personal Demat account, but rather the funds and securities lying in the brokers account on behalf of the client (yourself). These are funds/securities that are pledged, and moved from the client’s Demat account to broker’s account. A stock broker can pledge the securities held by client, if client owes money to stock broker.
A broker is allowed to move fund/securities from client account only for valid reasons like recovery of brokerage, any statutory dues, fund shortfall for debit balance clients subject to below norms:
Securities can be pledged only for clients that has debit balance in their ledger.
Should not pledge securities higher than value of client’s debit balance in ledger.
Stock broker should send statement with details about pledge, funding to client as and when pledging/release is done.
Pledging requires prior approval of client.
Stock broker is prohibited from misusing clients funds and securities for their own obligations or proprietary purposes.
How Does This Report Benefit You?
If you have any funds/securities that are pledged, potentially a broker could divert them for their self use without you being aware of it. Post the implementation of “Enhanced Supervision of Stock Brokers and Depository Participants” measures by SEBI the Stock exchanges (NSE/BSE) are required to send this report to you periodically. This makes any malpractice by broker not possible without client’s notice.
On a related note, Commodities exchange also sends reports containing funds and securities balance. SMS received from NCDEX (National Commodities and Derivatives Exchange) would have sender as VK-NCDEXL.
Email Reports Attachment
Depending on broker with whom you have account you would receive email report from NSE or BSE. For accounts held with NSE you will get email from “nse_alerts” (email@example.com) with subject “Funds/Securities Balance”. For accounts held with BSE, email would be from “BSE Ltd” (firstname.lastname@example.org) with subject “Details of your fund balance and securities balance as on < date > with Trading member < broker name >”
The email would contain the report as PDF attachment (password protected with PAN number) that has details about list & number of securities(ISIN), Fund balance, number of commodities along with date of report & client code. The balance details would be all zeros (unless other wise you have pledge). For an example, above is a report I received from NSE for my Groww account.