After the Karvy scam that rocked the broking industry a few
years back, Securities and Exchange Board of India
(SEBI) had come out with various circulars
and guidelines to protect investors. The latest attempt in
this endeavour is the proposal to block funds in investors'
bank accounts to undertake trades instead of funds being
transferred to the trading accounts maintained with brokers.
Presently, the clearing and settlement of transactions in
securities involve multiple intermediaries and pool accounts before
the funds and securities reach the intended recipients. For
instance, an investor, before executing a trade, would have to
transfer funds to the stock broker in his trading account, or would
have to post collateral with the stockbroker. The stockbroker posts
collateral with its clearing member, for both its as well as
clients' trades. The clearing member then posts collateral
with the clearing corporation for their and their clients'
trades, and then carries out
