Have you ever found a detail of a trade you never executed? Or is your brokerage more than what you have calculated? If you have ever encountered such cases, don’t sit quiet, it could be an unauthorised trading.
Such practices by your broker or advisor can lead to financial losses, legal battles, or breach of investor trust.
At present, when more and more people are getting into stock market trading, it is important to be more aware of practices like unauthorized trading to prevent yourself from facing any major consequences.
Let’s get into the detail to understand what exactly is unauthorised trading and ways to identify such illegal practices.
What is Unauthorised Trading?
Now unauthorised trading is the practice where a stock broker or an advisor trades in the client’s account without seeking his or her permission.
Now this is a direct violation of SEBI guidelines.
But even after that most of the brokers and advisors escaped from the eye of SEBI because of the unawareness of the trader, who most of the time couldn’t track such illegal activities in the account.
- Now this is generally done to make a huge brokerage.
- Brokers generally in the name of recommendations, take trade positions in client’s accounts leading to huge losses.
- In all these cases, the broker or advisors take a trade without availing permission from the client and hence client comes to know about losses after losing a huge chunk of capital.
If you have a trading account, then before getting into the trade, you need to know what’s your right and about the legal & illegal practices of the market & market participants to protect yourself from any kind of financial or emotional distress in the future.
SEBI Regulations on Unauthorised Trading
For every market participant, SEBI has stringent rules to prevent fraudulent activities and to protect traders from unauthorized trading practices.
Here are some of the regulations of SEBI related to trade practices that you must be aware of:
- Brokers must obtain written consent before executing trades on a discretionary basis.
- Every trade must be backed by clear communication, such as emails, recorded calls, or written approvals.
- Investors have the right to report unauthorized trades through SEBI’s online grievance redressal system, SCORES.
- Stringent penalties, including hefty fines and license revocations, are imposed on brokers involved in unauthorized trading.
Now, to ensure that your broker does not cheat or do any kind of fraud by executing unauthorized trades, it is important for you as well to be aware.
Let’s now get into the details of the signs that help you identify such trade practices.
How to Identify Unauthorised Trading in Your Account?
As a beginner it could be difficult to understand trading accounts and other activities related to them, but by just checkinga few things you can protect yourself from getting scammed.
Here are some of the signs that make it easier for you to catch unauthorised trading:
- Receiving SMS or email of trade you have not executed.
- A significant shift is in funds available in the trading account.
- Lack of communication from the broker side or vague justifications for trading activities in your account.
How to Report Unauthorised Trading?
If you’ve noticed any unauthorized trades or suspicious activity in your trading account, it’s important to act promptly. Start by contacting your broker to raise the issue and request a detailed explanation.
In case, you get no response or unsatisfactory response, then register with us.
Our expert team will guide you with the right steps that help you in reporting the case and recovering the lost amount.
How to Prevent Yourself from Unauthorised Trading?
There is an old saying, that prevention is better than cure and hence little alertness and awareness can prevent you from facing bigger consequences.
Here are the ways to prevent yourself from unauthorised trading:
- Regularly monitor the ledger statements of your trading account.
- Use secure trading platforms and enable two-factor authentication.
- Maintain written communication via email or recorded messages for every trade approval.
- Choose SEBI-registered brokers with a strong compliance record.
Conclusion
Unauthorized trading is a growing concern, and investors must remain cautious to protect their capital.
By staying informed, monitoring accounts, and reporting suspicious activities, retail traders can minimize risks and ensure a safer trading environment.
SEBI’s regulations are in place to curb these malpractices, but investor awareness plays a key role in tackling unauthorized trading effectively.
Have you ever experienced unauthorized trading? If yes, then fill in the details in the form below and let our team help you in getting refund of your losses.
