You wake up and go through the same routine you’ve been doing for months, maybe even years. You brush your teeth, get dressed, and sit at the breakfast table with your phone in hand. By habit, you open your trading app not to make any trades, just to check.
That’s when you notice something is wrong. The numbers don’t match what you remember. There are trades open that you were never permitted to. Losses show up without any explanation.
For a few seconds, you think it’s a technical error. Then comes panic, and with it, a deeper, more unsettling fear: someone has been trading in your account without you actually being in control.
The shock hits hard because it’s not just about losing money; it’s about losing trust, questioning your choices, and realizing that giving up control didn’t make things easier.
Unauthorised Trading
Unauthorized trading is not just a small mistake; it’s a serious act that breaks trust.
Basically, unauthorized trading happens when trades are made in an investor’s account without their clear and specific approval.
This can mean buying or selling stocks or other investments without the investor’s say so, making trades that go beyond what was agreed on, or acting without the investor even knowing.
Even in accounts where the broker has some limited approval rights, trading can still be unauthorized if the broker goes beyond agreed limits, takes too much risk, or trades mainly to get commissions.
This behavior breaks the broker’s duty to act in the client’s best interest and is often seen as a form of securities misconduct because it can cause financial loss, emotional stress, and a loss of trust for the investor.
What makes unauthorized trading even more dangerous now is that it doesn’t only happen through traditional brokers.
Many cases today involve unregistered entities that operate outside of regulation.
These include unregistered brokers, social media financial influencers, people who manage trades via apps like Telegram or WhatsApp, signal providers, portfolio managers, and individuals who pretend to be market experts or relationship managers.
Because these entities aren’t registered or regulated, there’s no formal responsibility, no compliance rules, and very few options for getting money back if losses happen.
Regulators try to stop this by requiring trade confirmations, sending SMS or email alerts, and keeping strict records, but these protections only work if investors stay informed and don’t give control to people who aren’t legally allowed to.
Unauthorized Trading Risks in India
Unauthorized trading is dangerous not only because it involves financial loss, but because it often occurs outside the regulatory safeguards designed to protect investors.
When trades are executed without proper authorisation or through unapproved platforms, the checks and controls that ensure transparency, fairness, and accountability are missing.
As a result, investors may be exposed to financial harm, fraud, and legal complications, with limited or no avenues for redress.
What makes unauthorized trading particularly damaging is that its consequences are often discovered only after the damage has already been done, when funds are depleted, accounts have been misused, or recovery becomes uncertain.
Key Risks Include:
- Total Loss of Funds
Money routed through unauthorized or illegal channels may be irretrievable, especially when dealing with unregistered entities. - No Investor Protection Mechanisms
Investors may not be able to access SEBI’s SCORES system, exchange grievance mechanisms, or compensation frameworks when trades occur outside the regulated ecosystem. - Fraud and Disappearance Risk
Unregulated individuals or platforms may manipulate prices, misappropriate funds, or disappear entirely, leaving investors with no recourse. - Legal Consequences for Investors
Participation in illegal or off-exchange trading can expose investors to penalties under laws such as FEMA and other financial regulations, even if they were unaware of the violations. - Broker Misconduct and Churning
In some cases, brokers may execute trades without client consent to generate higher brokerage through excessive trading (churning), prioritising commissions over the investor’s best interests. - Misuse by Research Analysts (RAs) and Investment Advisers (IAs)
RAs and IAs are permitted to provide advice, not to execute trades or control client accounts.
When they place trades, influence execution without consent, or encourage frequent trading for indirect gains, it constitutes unauthorized activity and a breach of regulatory boundaries.
- Excessive and Unnecessary Trading
Frequent trades may be executed to recover earlier losses or generate fees, steadily eroding the investor’s capital. - High-Risk Positions Beyond Investor Capacity
Investors may be exposed to leveraged or speculative positions without proper risk assessment or disclosure, amplifying potential losses. - Margin and Leverage Misuse
Use of margin without a clear explanation or consent can cause losses to escalate rapidly in adverse market conditions. - Delayed or Suppressed Disclosure of Losses
Losses may not be communicated promptly, preventing investors from taking timely corrective action. - Account Takeover or Credential Misuse
Sharing or theft of login credentials can allow third parties to operate accounts without permission, leading to unauthorized trades. - Difficulty in Recovery and Resolution
Even where regulatory mechanisms are available, recovering losses from unauthorized trading can be time-consuming, complex, and uncertain.
Forms of Unauthorised Trading
- Unregistered Trading or Investment Platforms
Some websites or apps offer services like online bond trading, virtual trading games, or simulated stock trading, but they aren’t approved by authorities.
These platforms may look professional, but aren’t under regulatory control.
Example – Jitendra Sharma was arrested after defrauding investors of over ₹48 lakh using a counterfeit trading app that looked real but wasn’t connected to any regulated broker.
- Handling Client Accounts (Sharing Login Details)
This is a very common and dangerous way of doing unauthorized trading. Investors are asked to share their login details like usernames, passwords, or one time codes so someone else can trade on their account.
This is against the rules, even if it’s done with trust.
Example – SEBI stopped this Kolkata broker from onboarding new clients for one month after inspections found multiple regulatory violations related to client accounts and compliance.
- Dabba Trading
Dabba trading refers to buying and selling securities outside recognised stock exchanges such as NSE or BSE.
Although prices may mirror market rates, these trades are not recorded on official exchanges.
Transactions are maintained in private records or software, and settlements often occur through cash or informal transfers.
Such trading bypasses audits, taxation, and investor protection mechanisms, making it illegal and highly risky.
How to Protect Yourself from Unauthorised Trading?
Although markets have risks, losses from unauthorised actions often feel unfair because they weren’t something you chose. The good news is that many of these problems can be avoided if the right steps are taken early.
Here are a few steps to keep yourself alert
- Understand recovery limits clearly – Losses from SEBI-registered entities might be recovered through official channels, but money lost through unauthorised trading, especially with unregistered entities, is often hard to get back or impossible to recover.
- Deal only with SEBI-registered entities – Always check if a broker, adviser, or research analyst is registered with SEBI before working with them. Never share your trading credentials. Your user ID, password, and OTP are your personal details.
- Avoid unregistered platforms and tip groups – Stay away from Telegram channels, WhatsApp groups, social media influencers, or apps that promise guaranteed returns.
- Monitor alerts and contract notes – Read SMS, email alerts, and daily contract notes carefully. These are often the first signs of unauthorised activity.
- Document everything – Save messages, emails, call recordings, and transaction details. They can be important if you need to make a complaint.
- Act immediately if something feels wrong – Tell your broker in writing and report the issue right away if you notice unauthorized activity.
How to Report Unauthorised Trading in India?
When unauthorized trading is discovered, people often feel scared or confused.
That’s normal. What’s most important is to act fast and in the right way, because reporting quickly makes it easier for investigators to look into the matter and find a solution.
You can follow these steps to report:
- Inform the Broker or Platform Immediately – Contact your broker or platform right away through email or their official support channel. Clearly explain the unauthorized trades, including the dates and amounts involved, and request a written explanation. This is important because SEBI requires investors to first bring the issue to the attention of the relevant company.
- Collect and Organize Evidence – Gather all the relevant proof, like contract notes, trade confirmations, bank statements, screenshots, emails, chat messages, and call recordings. Having a well-organized complaint makes it easier to show that the trades were done without your permission.
- File a Complaint on SEBI’s SCORES Portal – If the broker or company doesn’t resolve the issue in a reasonable time, report the problem through SEBI’s SCORES platform. We will guide you how to lodge complaint in SCORES.
- Approach the Exchange or Depository – If the issue involves a stock exchange or a demat account, you can also file a complaint with the relevant exchange or depository.
- Seek Legal or Professional Assistance – If the unauthorized trading penalties are big or the situation is complicated, it’s wise to get advice from a lawyer or a professional. This is especially important when dealing with unregistered entities, where getting your money back may be hard and official action might be needed.
Need Help?
If you’ve been a victim of unauthorized trading, you don’t have to go through this alone.
Register with us. We know how tough it can be when trust is broken, and money is involved, and we’re here to support you every step of the way.
Our team has helped many people in similar situations by guiding them carefully, starting with understanding what happened and gathering the right evidence, then helping with complaints and following up until things are clear.
Even if you’re not sure where to start, just reach out.
We’ll help you take the next step with calm, clear advice and support, so you don’t have to face this on your own.
Here’s how we help you from the beginning to the end:
- Understanding Your Case – We listen carefully to what happened, look at the timeline, and find out where the unauthorized activity took place.
- Documentation Support – We help you gather, organize, and check all the necessary documents like contract notes, bank statements, emails, chat logs, screenshots, and call records.
- Drafting the Complaint – We help you write a clear and factual complaint that explains the problem properly without any confusion or emotional language.
- Filing & Escalation – We guide you through filing the complaint with the broker, SEBI, or the right authorities and help move things forward if there’s no response.
- Follow up & Guidance – We stay with you throughout the process, helping with follow ups, responses, and next steps until the issue is clear and resolved.
Conclusion
Unauthorised trading risk isn’t just about money; it’s about losing control, which can make an investor feel unsure and unsafe. While some risk is part of investing, when trades happen without permission, it’s a problem that shouldn’t be ignored or accepted.
The best way to stay safe is to be aware. Know who is allowed to make decisions, understand how your account works, and spot early signs of something wrong. Concern is not a weakness here; it is a signal to pause, verify, and protect yourself.
Being careful doesn’t mean missing out on chances; it means staying in control, informed, and ready to act. When investors stay alert and make smart choices, unauthorised trades can’t hurt them.
