What is the difference between fund balance and security balance?

If you have a trading and demat account, you might have come across the message ‘Your Stock Broker Reported Your Fund Balance’ multiple times. 


These monthly messages are sent by NSE, BSE, and MCX with the monthly updated details of funds and securities. This is a new initiative of SEBI’s supervision. You must have wondered what these messages mean.


In this article, we’ll try to understand what is fund balance and security balance, what is the difference between the two, and also about fund vs securities balance in a broker’s account.

What is a fund balance?

Funds in the market are the cash value present. 


The fund balance is the accumulated revenue for a client minus the expenditures. The fund balance can be used in future years for different purposes.


A fund balance is the amount of cash present in the account of the broker that belongs to the client (you). 

What is a Securities balance?

There are securities present in the market like equity preferred stocks and debt preferred stocks where people invest. 


The different kinds of stocks are known as securities. 


Likewise, a security balance is the number of shares that the broker’s Demat account might have that belong to the client i.e you. 

Fund vs Securities balance in broker’s account

Funds vs Securities balance are not what is present in your trading/ demat account but it is the funds and securities that are present with the broker’s account on your behalf. 


A stock broker can pledge the securities held by the client if the client owes any money back to the stockbroker. 


A broker has the allowance to move funds/securities from a client’s account for reasons such as statutory dues, fund shortfall, and recovery of brokerage amount with respect to the following rules:


  • Stock brokers are prohibited from misusing the funds and securities that belong to the clients for their proprietary purposes.
  • Pledging cannot be done without the permission of the clients
  • The broker cannot pledge securities higher than the value of the clients debit balance in the ledger
  • The pledge can be only done for clients who have balance in their ledger
  • The broker will have to send the statement to the client for the pledge done

Why does the number on the message show 0 balance when you do have shares in your Demat account? 


This is because this balance represents the balance the stock broker has in their accounts for you. 


The balance of equity shown here is not the number that belongs to you but what is held with the broker’s beneficiary account for whatever reason. 

Why the new SEBI initiative?

Do you know why this initiative by SEBI has been started though? 


You might be wondering what we need to do with the balance in the broker’s Demat account. But it does have a lot to do as it represents your funds and securities that might be held in the broker’s account. 


This initiative was taken to avoid any kind of malpractice among the brokers. 


If you do not have funds or securities that are already pledged then a broker could use them for their self-use without you being aware of it. 


Post the implementation of “Enhanced Supervision of Stock Brokers and Depository Participants” measures by SEBI, the Stock exchanges (NSE/BSE) are now required to send this report to the clients for transparency. This helps to avoid any malpractice by the brokers without the clients’ notice.


One needs to understand why and how the funds and securities balance works. 


Understanding your investments and trades and where you are putting your hard-earned money is very important. 


There are different charges that you should keep a check on. Regular checks and monitoring of your investments are crucial for any investor or trader. 


These kinds of initiatives by the SEBI and other concerned regulatory bodies are made to make things transparent between the brokers and the investor to avoid malpractices.

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