Vikram (name changed) is not the type to lose track of his own trades. He is a hands-on trader, watches his positions closely, and knows exactly why each one is open. His account, with a well-known registered broker, ran to about ₹3.5 lakh.
One morning, he was sitting on fifteen Nifty lots, holding them deliberately. He had conviction in the position and every intention of riding it.
Then, around half past ten, two of those lots vanished from his account. No call. No confirmation. No message saying your margin is short, please add funds. The broker had simply exited the positions on its own.
When he asked, the answer came back later: a margin shortfall. But he had never been told there was one. He was never asked to bring in money. He was never given the chance to fix it.
His positions were just closed, at the broker’s discretion, in silence, and the forced exit booked him a loss of around ₹20,000 on trades he had wanted to keep.
He did the right things. He called the broker three times. He got a templated email promising a response in two to three working days. Then nothing.
When he came to us, he wanted to know one thing: were they even allowed to do that? The answer is no, not like this. We have taken up his case, and it turns on a rule most traders never think about until it costs them.
Can a Broker Square Off Your Position Without Informing You?
Start with the bottom line.
Your open positions are yours.
A broker cannot simply exit them at will, without your consent, as a casual act. Closing a client’s trades without confirmation is not permitted; it is exactly the kind of conduct SEBI’s norms exist to prevent.
The fact that the broker has access to your account does not turn your positions into theirs to manage on a whim.
So the first problem is not the loss. It is that two of his lots were closed at all, by someone who was not him.
“Margin Shortfall” Is a Procedure, Not a Shortcut
Here is where brokers lean, and where most clients give up.
A genuine margin shortfall does not hand a broker a blank cheque.
If your margin truly falls short, the broker is meant to inform you and allow you to bring in funds before squaring anything off, and any square-off it does carry out has to follow the broker’s disclosed risk policy, not happen silently at 10:30 with no intimation at all.
A real shortfall does not, on its own, entitle a broker to:
- pick which of your positions to close,
- decide when to close them,
- at whatever price it gets,
- and tell you only afterwards.
That discretion is bounded by process. When the process is skipped – no notice, no chance to add margin, no consent – “margin shortfall” stops being a defence and becomes the thing the broker has to answer for.
The Loss Is Traceable to the Broker
This is what makes the case clean. Vikram was holding those lots on purpose.
He did not choose to exit. The broker chose for him, and the choice resulted in a loss.
A loss that flows from a position closed without your consent and without proper intimation is not your trading outcome – it is a consequence of the broker’s conduct, and that is recoverable.
How You Get Your Lost Money Back
- Step 1: File a written, violation-wise complaint with the broker’s compliance officer – the square-off without consent, the absence of any margin-shortfall intimation, and the loss it caused. (You have already started this trail with your calls and their email – keep it.)
- Step 2: No real resolution in 15 working days? File a complaint in SEBI SCORES.
- Step 3: Escalate to SMART ODR, and on to exchange arbitration before a panel if it is not settled.
Capture the evidence now. Contract notes generate at night, so in the moment take screenshots of your order book and position book showing the lots that were exited.
Save the complaint trail – the call records, the “two to three working days” email, and your margin statements. Together they show that the positions were closed without notice and without your consent.
The line worth keeping: a margin shortfall might be a reason to call you – it is never a licence to close your trades behind your back.
Lost money to an unauthorized square-off? Don’t let your broker walk away with your hard-earned capital.
Fighting a broker alone through legal jargon and templated email replies is exhausting. We specialize in representing retail traders, gathering bulletproof evidence, and handling the entire escalation process, from SEBI SCORES to SMART ODR arbitration.
Register with us now and we will let our experts review your ledger and help you fight to get your money back.
Frequently Asked Questions
1. Can a broker square off my position without telling me?
Not silently. A broker must follow its disclosed risk policy and, for a margin shortfall, is expected to inform you and let you bring in funds first. Closing your positions without intimation or consent is the conduct you complain about.
2. They said it was a margin shortfall. Doesn’t that make it allowed?
A genuine shortfall still requires proper intimation and a chance to add margin before any square-off. It is not a blank cheque to liquidate whichever positions the broker chooses, without notice.
3. How do I prove what happened?
Screenshot your order and position book at the time, since contract notes only generate at night. Keep the complaint trail and your margin statements – they show the exits happened without notice or consent.
