Managing DP

[Memo] Penny-wise & pound-foolish – how brokers dupe investors?

Posted by | Indian Markets, Memo | No Comments

Following is a copy of recent memo shared with Stalwart’s clients – It is unfortunate that despite such strict regulations and risk management by SEBI and Exchanges, in a recent case a Delhi-based broker could pledge his clients’ securities worth Rs 55 Cr., borrow money, divert funds for trading/personal use and eventually default. The investors are now at risk of losing a part or all of their portfolio. A broker can do that because sometimes clients agree to transfer their securities to broker’s pool account, whereas in many cases it could also be done fraudulently without letting clients know about it. Why do investors allow the broker to transfer their DP holding to broker’s pool account? Brokers lure clients by offering interest on securities as high as 7-10% if they agree to …

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