Every day, retail traders find themselves hit with penalties from brokers for margin shortfalls. But is this even legal? Can brokers really charge such penalties?
Many traders, unaware of their rights, end up paying these penalties, which just adds to their losses. Fortunately, there are retail traders like Jasmine Thumar, who stayed aware with SEBI regulations and NSE guidelines, managed to recover 50% of his losses after a two-year struggle.
Here’s how it unfolded and what you can learn about standing up for your rights:
Jasmine Thumar was trading in F&O using a family member’s Upstox account. In June 2021, he noticed a penalty of ₹2,30,826/- on his account. When he asked the broker about it, they said it was due to a margin shortfall.
Luckily, Jasmine was up-to-date with SEBI rules and knew that brokers can’t charge penalties for margin shortfalls directly.
Here’s What Jasmine Did?
- First Steps: He found the penalty charge of around ₹2 lakh, which appeared on his ledger 10-15 days later and was deducted in installments. Initially, the broker took ₹15,000 in 2 installments, and later ₹90,000.
- Reaching Out: Jasmine contacted customer support, but the responses were unsatisfactory. However, one of the executive told him that there could be some issue as ledger balance are updated at the end of every trading session.
- Legal Action: When customer support stopped responding, Jasmine hired a lawyer and sent a legal notice along with SEBI’s circular on margin shortfalls to Upstox. Upstox shockingly claimed the circular didn’t apply to them.
Many traders might have given up at this point, but not Jasmine. He filed complaints in SCORES and the NSE portal.
NSE arranged a GRC meeting, where he presented three SEBI circulars about margin shortfalls. In the panel meeting he even told the broker that if they could provide any documents justifying their actions, he’d withdraw his complaint.
But Upstox’s representatives tried to mislead the communication.
In the end, the GRC committee ordered Upstox to refund 50% of the amount, ₹1,15,000.
With no intention to pay the pending 50% amount Upstox took the case to arbitration, where the NSE ruled in Jasmine’s favor, ordering a full refund plus 9% interest.
After two long years and spending around ₹50,000 on legal fees, Jasmine didn’t end up with a profit, but he fought hard for his rights.
This is a true example of a trader standing up for what’s right and fighting back when things go wrong.
It sets a wonderful example for all those traders who trade actively in the stock market using one or the other trading account and gives them a message that along with trading it is important to stay aware of market regulations.
