Brokers will now be penalised because of failure to comply with the ‘short allocation’ norms, according to a notice from the exchanges that took effect from Tuesday. Experts say the imposition of penalty is meant to enhance transparency by ensuring compliance with Sebi’s diktat that came into effect on August 1, 2022. The regulation requires brokers to report client-specific allocation of funds in real time to clearing corporations, which will then set client-wise limits.This is to ensure funds pledged by one client cannot be used to fulfil the margin requirements of another. Brokerages may, however, be given a waiver if they report instances of short allocation with valid reasons.
“Earlier, funds pledged by clients with brokers were reported on an overall basis to clearing corporations, at the broker’s level. With this change, funds allocated to each client for different segments have to be reported in real time,” said Tejas Khoday, co-founder and CEO of FYERS, a broking-tech platform.He added that while the regulation has been in place since a year-and-a-half, penalties were not imposed till now. The penalty for failure to comply will be 1% of the short allocation, per day. The idea, he said, is to ensure transparency regarding clients and to monitor trades on an intra-day basis.