What can you do if there is “unauthorized trading” done through your account? What can you do if you have applied for an Initial Public Offer (IPO) and have problems with allotment or money refund?
What do you do if you have to file a stock broker complaint?
Unauthorized trading in futures by stock broker
A Capital Orbit reader recently got in touch with me. I cannot name the person nor his stock broker involved but let me say that there are many more people who have faced problems like this person. The problem went like this.
- The stock broker carried out futures (derivatives) trades in this persons trading account
- The person failed to look at the contract notes / transaction statements which are sent by the stock broker as per SEBI rules.
- The futures transactions that the stock broker undertook caused big losses.
- The person had equity shares in his demat account. They had a market value.
- When losses became large the person was informed by the stock broker to put up margin (cash) else the stock broker would sell shares in the portfolio to make good the negative amount.
If you do not know what derivatives are, understand that they are financial instruments which can cause great losses and profits alike. Most retail investors sadly have tales of great losses!
The big fight with the stock broker
Subsequently the person has had long arguments over telephone and many emails with the stock broker. The executive sitting at the broker’s office initially said that the person had given the permission to carry out trades. The customer service at the head office of the stock broker washed their hands off the matter saying that the person was at fault.
The fight is still on as we speak. He has subsequently asked the stock broker to show him the paper that he has signed that authorizes the stock broker to carry out futures transactions. Our friend is sure that he has signed no paper. If the broker made a trade he should have had a formal authorization on paper.
Even when the stock broker was in the wrong, he was not budging. He mentioned that disputes like these keep happening. He will be glad to fight it out. All these were empty threats.
Stock broker climbs down
In the last week, the stock broker has come down his high horse and agreed to negotiate and settle this matter amicably.
This person was wise enough to threaten that he will take action and lodge a complaint with SEBI.
What is Securities Exchange Board of India?
The SEBI website states its basic function as:
…to protect the interests of investors in securities and to promote the development of, and to regulate the securities market and for matters connected therewith or incidental thereto
In common parlance, they are the regulator for capital markets in India. The stock exchanges, BSE and NSE are regulated by SEBI. All the stock brokers too.
And if you as a retail investor have a problem with any market intermediary or any company that has shares listed on the stock market, you have a right to redress.
What is the SEBI SCORES system
It is a mechanism to resolve complaints in an easy way. It gives you the option to avoid the paper route.
- Accessible through website.
- Toll free help line – 1800 266 755 or 1800 222 7575
- You can lodge a complaint online.
- SEBI forwards the complaint to the concerned entity (company or intermediary).
- The reply is received by complainant through SEBI SCORES system.
- If you do not receive a reply in 30 days from the date of lodging a complaint you the matter is escalated to a dealing officer with SEBI.
- You can track status of your complaint online.
- Documents supporting your complaint can be scanned / uploaded online.
How tough can SEBI get?
There was a high profile case a couple of years back where someone forged and used a SEBI letterhead and tried to manipulate a listed company’s stock price and make a quick buck.
To understand the powers that SEBI has and what it can do against the entities that come under its regulatory watch, open the link below.
Go to page 10-12. You will see examples of how SEBI can crack the whip when it gets serious.
- Going through bank accounts of people it suspected and their relatives.
- Completely scanning trading records.
- Going through email records.
- Working with telecom companies’ mobile tower data to infer that alleged person met together at one location near Pritam Hotel in Dadar, Mumbai
Next time you face any problem with your broker you know whom to approach. Having worked in a company which was regulated by SEBI I know how seriously they are taken.
Our reader is still in the process of getting his money back. Lets wish him luck!