You may have seen the notification ‘Your Stock Broker Reported Your Fund Balance’ several times if you have a trading and demat account.
The NSE, BSE, and MCX send these monthly notifications with monthly updated details of funds and securities. This is a new SEBI oversight initiative. You’ve probably wondered what these messages indicate.
In this post, we’ll look at what is fund balance and security balance? how they differ, and how fund balance and securities balance works in a broker’s account.
Table of Contents
What is Fund Balance?
Fund balance meaning is the cash value present in your demat account. The fund balance is the cumulative revenue for a client less the expenses. The fund balance can be used for a variety of reasons in subsequent years.
A fund balance is the amount of money in the broker’s account that belongs to the you. Now if you don’t use the fund balance by end of the month the stock broker will transfer back to your bank account as per the new sebi rule.
What is a Securities balance?
People invest in securities such as equity preferred shares and debt preferred stocks, which are available on the stock market. Securities refer to the various types of stocks.
Similarly, a security balance is the quantity of shares in the broker’s Demat account that belong to the client, which is you.
Difference Between Fund Balance and Security Balance
The balance of funds against securities is not what is actually in your trading/demat account, but rather the funds and securities that are present in the broker’s account on your behalf.
If a client owes funds to the brokerage, the stockbroker can pledge the stocks held by the customer.
A stockbroker may transfer funds/securities from a client’s account for purposes such as statutory dues, fund deficit, and brokerage amount recovery.
Sebi Rules Regarding Fund Balance and Security Balance
Here are the rules which are made by Sebi to protect Clients:
- Stock brokers are restricted from exploiting their clients’ funds and securities for their own benefit.
- Pledging is not possible without the clients’ permission.
- The broker cannot pledge securities worth more than the client’s ledger debit balance.
- The commitment is only available to clients who have a balance in their ledger.
- The statement for the pledge must be sent to the client by the broker.
Why does the notification show a balance of 0 while you have shares in your Demat account?
This is due to the fact that this balance indicates the balance in the stock broker’s account for you.
The balance of equity listed here is not yours, but rather what is held in the broker’s beneficiary account for whatever purpose.
Why does the exchanges send an SMS and an email regarding the funds and securities balance every week?
As required by this SEBI circular, exchanges provide all clients an email and SMS once a week with information about the balance of their funds and securities ( PDF ). In order to prevent any potential financial misappropriation and to inform clients of the available funds in their trading accounts, this information is given.
The email attachment shows the available balance as of the previous week’s end. The balance that exchanges send to their customers is accurate as of the date that is specified in the SMS and email, not the day that it is actually transmitted. The new balance applies to all exchanges rather than just one in particular.
Note:
The shares held in the broker’s beneficiary account are included in the overall number of ISINs, not the balance in the client’s demat account. Due to this, the total ISINs may be displayed as 0.
Sebi’s New initiative
What we should do with the balance in the broker’s Demat account may be something you’re wondering. However, it is important since it represents your money and any securities that may be kept in the broker’s account.
This action was taken to prevent brokers from engaging in any sort of dishonest behavior. If you do not already have funds or securities committed, a broker may use them for their own benefit without informing you.
The stock exchanges (NSE/BSE) are now obligated to furnish this information to the clients for transparency following the introduction of “Enhanced Supervision of Stock Brokers and Depository Participants” regulations by SEBI. This makes it easier to prevent broker misconduct that goes unnoticed by the clients.
Importance of Fund Balance And Security Balance
It’s important to comprehend the workings of the money and securities balance. It’s crucial to comprehend your transactions, investments, and where you are allocating your hard-earned cash.
There are many fees that you need to be aware of. For any investor or trader, regular audits and monitoring of your investments are essential.
These measures by the SEBI and other relevant regulatory organizations are designed to increase transparency between brokers and investors in order to prevent fraud.
Conclusion
Fund balance Meaning and Security Balance meaning are well explained above with sebi rules and importance of both of them.
This is all from our side regarding What is Fund Balance And Security Balance. Please share your thoughts in the comment section.
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FAQ About What is Fund Balance And Security Balance?
What does fund balance mean?
A local government's fund balance is the entire total of all operating surpluses and deficits since its inception. The formula for calculating fund balance is assets minus liabilities.
What is fund balance and security balance in SBI Securities?
The balance of your funds and securities is not what is in your trading or demat account, but rather what is in the broker's account on your behalf. If a client owes the brokerage any money back, the stockbroker may put up the securities that the client owns as collateral.
What is fund balance reported by broker?
The funds and securities balance shown here are not those stored in your own Demat account, but rather those that are in the broker's account on the client's behalf (yourself). These are assets that have been transferred from the client's Demat account to the broker's account and pledged.
What is grow fund balance?
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Can we withdraw fund balance?
The amount of money in your trading account that can be transferred to your bank account is known as the withdrawable balance. Due to the fact that cash from stock and F&O trades is not settled immediately, it may differ from the net available funds indicated in the funds statement.
