Mumbai, Oct 29 (SocialNews.XYZ) The National Stock Exchange (NSE) has flagged multiple compliance lapses by brokers and authorised persons (APs), including failures in margin collection for margin trading facilities (MTF), misuse of client accounts, deficiencies in fund settlements and weak cybersecurity controls, based on inspections conducted between October 2025 and March 2026.
Among the key concerns identified by the exchange were instances where brokers extended margin trading facilities against ineligible securities, including stocks that did not fall under the eligible Group I category.
The NSE also found cases where adequate margins were not collected from clients despite regulatory requirements mandating brokers to obtain margins in the form of cash, cash equivalents or eligible securities after applying prescribed haircuts.
The observations come at a time when the MTF segment has witnessed rapid expansion.
According to data compiled by Care Edge Ratings from NSE and BSE, the MTF book size increased from approximately Rs 96,000 crore in August 2025 to Rs 1.48 lakh crore in August 2026.
The exchange further observed delays and failures in issuing daily margin statements to clients, while several statements contained inaccurate or incomplete details. Brokers were also found to have incorrectly reported margin and mark-to-market (MTM) loss collections to the exchange.
In some cases, client funds were not settled within prescribed timelines and material discrepancies were discovered in client retention statements.
NSE inspections also revealed instances where brokers paid out funds exceeding clients' available credit balances and passed on penalties imposed for short collection of upfront margins to clients.
The exchange noted failures in sending mandatory SMS and email alerts informing clients about fund transfers during running-account settlements.
Authorised persons were found engaging in several prohibited activities, including receiving or paying client funds directly, using client credentials to execute trades without proper authorisation and obtaining blanket permissions to trade on behalf of clients.
Some APs were also found conducting trades to generate brokerage income, offering fixed or assured returns, entering profit-sharing arrangements and providing unauthorised portfolio management services.
Source: IANS
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