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Journalism of Courage
Investors continue to suffer at the hands of brokerages even as the capital market regulator is trying its best to strengthen the risk and surveillance mechanisms in the market. Data show that stock exchanges are still flooded with complaints related to unauthorised trading by brokers on behalf of their clients.
In the current calendar year,the BSE has received 214 complaints against brokerages for carrying out unauthorised trading on the behalf of their respective clients. This is only slightly less than last year,when 247 such complaints were registered in the same period.Interestingly,the NSE saw an increase in the number of complaints related to unauthorised trades and misappropriation of funds in 2013. This year saw the NSE receiving 1,064 such complaints,nearly 30% higher than the 820 complaints that the bourse received in the first five months of 2012.
Brokers also acknowledge the fact that there have been instances wherein dealers trade on behalf of their clients without proper approvals. They,however,add that investors should also be alert and be specific while placing orders with their dealers.
There was a case where a dealer kept buying huge volumes in his clients account. While he was making losses from the trades,the dealer told the client that he was making profits. Only after five months the investor realised that he had made losses of R60 lakh, says Bhavesh Shah,sub-broker,Emkay Global.
Interestingly,many believe that the stiff targets given out by brokerages to their relationship managers also act as a catalyst in increasing instances of unauthorised trading. To meet their targets,managers try to convince gullible investors to allow them to trade on their behalf while promising handsome returns. The higher the turnover the bigger is the brokerage. While the industry is well-regulated,a section of brokerage houses misguides the investors, says Sonam Udasi,senior vice-president & head (research),IDBI Capital.
It is widely believed that the derivatives segment is misused by brokers to build huge positions on behalf of their clients. A large number of small investors dont understand the technicalities of the F&O segment and believe their dealers without bothering to check the contract notes.
The NSE,on an average,has received 2,372 complaints for unauthorised trades and misappropriation of funds in the last three years. The BSE has received nearly 1,000 such complaints during this period.
