Things to do if your stock broker defaulted

November 25, 2019 Finance Talk Valli Sarvani No comments

Securities and Exchange Board of India (SEBI) has banned Karvy Stock Broking Ltd. from taking new clients.

According to the Order of SEBI, the stock company has allegedly sold client stocks pledged with it and transferred to its account.

If you are a client of a broking firm which confronts such fraud, there are certain things to do:

Take the contract note concerning the transaction you carry out through the broker. Also, check the details like trade, number, transaction price, name of the broker and the brokerage.
Being a client, make sure that you deal only through the SEBI registered brokers or sub-brokers for your stocks or derivatives.

Check your account frequently and ensure that your sale trade amount is credited into the demat account within 48 hours.
You can open a new demat account to transfer the securities of a broker firm to avoid further misuse of funds. But this needs a lot of paperwork.
Any idle funds in your demat account can be transferred to your bank account.
If you notice any default by your broking firm, report to the exchange.
If your issue remains unsettled even after 15 days, then the case would be automatically referred to Investors’ Grievances Redressal Committee (IGRC).
You can proceed with the arbitration process if are not convinced with the resolution process.
However, the broker should not be declared a defaulter by the exchange to initiate the process. You can send an application form by paying the prescribed fee to the stock exchange.
If the broker has already been declared a defaulter, then an advertisement would be issued to raise a claim. Then, the defaulters’ committee settles the claim on a pro-rata basis through the defaulter’s account.
Yet, if the amount is not sufficient to meet the claim amount, then the claim is settled from the Investor Protection Fund as per guidelines of the exchange.