We’ve seen cases of stocks being misappropriated by a few brokers because of which the market regulator SEBI recently issued this circular which mandated that a clear distinction be kept between broker securities and client securities, disallowed pledging of client stocks with NBFCs, Banks and other such financial institutions, advised all brokers to report pledged holdings on a daily basis.
Despite bringing about all kinds of regulations to curb such misappropriations, can a broker still end up misusing client funds and/or securities. The honest anwer is, Yes, which is why it becomes extremely important to ensure you are choosing the right broker since your broker is the custody of your stocks and funds just like a Bank.
How do you choose a right broker? Nithin’s given some parameters here and explained why it’s safe to trade with Zerodha How safe is it to trade with Zerodha now in 2018? - #3 by nithin