Like every casual day, Nikita opened her trading account to look for trades, unaware of what surprise was waiting for her. With a shocker waiting for Nikita, she was astonished to see that her account balance was -50,000
Nikita panicked and immediately contacted customer support of her stock broker to enquire how is it even possible. They told her that you had executed a trade in Bank nifty which resulted in losses.
But actually, Nikita did not execute any trade from her account. Soon she realised the broker had executed this trade from her account without her consent.
Just to earn some brokerage, the broker used her entire capital of ₹3,00,000 and additionally made a loss of ₹51,130 to her trading account.
Nikita’s heart almost sank after seeing a loss of ₹3,51,130. Nitika contacted the brokerage firm regarding this unauthorized trade activity but they also refused by saying it’s not their fault.
Shocked Nikita made herself calm and decided to file a complaint against the broker. She gathered all the proofs of trading and reached out to us.
After listening to her case, our team finally understood that it was a case of Unauthorized Trading. This type of fraud is done by broker just to meet their brokerage targets.
Cases like these are very common these days and can happen to anyone. Hence everyone needs to be aware of what their broker is doing. It is important to raise questions if they find any such activities in their trading account.
Where Nitika Can Raise Her Concern?
SEBI has given certain rights to a trader that help a trader to raise their concern and report the case to one or multiple authorities.
Our team suggested some of the platforms where she can file complaint to get justice and recovery of losses.
- Right to Reach Out to Broker’s Compliance Officer: Nitika can file a formal complaint against a broker to its compliance officer. The firm should handle her grievances and investigate claims against unauthorized trading.
- Right to File a Complaint in SEBI: In case of unsatisfactory resolution or denial of resolution by the brokerage firm, Nikita can escalate the issue to SEBI. She can submit her complaint on the SCORES portal for redressal, providing all significant details of the incident.
- Right to Arbitration: Here Nikita and the broker can opt for private dispute settlement instead of going to court. Both parties have to consider the decision of arbitration.
- Right to Legal Recourse: If the dispute remains unsolved by any of the above-stated processes, Nikita has the right to file a lawsuit against the broker for recovery of her losses.
What Steps did Nitika take to Lodge a Complaint?
With the help of our team, Nitika took the following steps to fight for the recovery from her losses:
- Collected evidence: She gathered proof of records like account statements, date of trade, proof of trade execution, or any communication with the broker or firm.
- File a complaint: She submitted a written complaint to the brokerage firm and regulatory authorities providing the required documentation.
- Addressed the Concern to SEBI: When she didn’t receive any satisfactory response from the broker, she escalated the issue to SEBI.
What Actions Must SEBI Take To Stop Unauthorized Trading?
Now these are the steps that a victim can take after getting scammed by a registered entity. But don’t you think it is the primary duty of SEBI to make some strict regulations to stop such practices?
Here are a few things that SEBI must consider to stop such scams from happening.
- Impose Penalties: SEBI must impose significant penalties on brokers who are found guilty of unauthorized trading. Penalty ranges vary for different violations, encouraging brokers to follow regulatory guidelines.
- Suspension or cancellation of license: If found guilty SEBI can suspend or revoke the registration of the stock broker temporarily or permanently.
- Refund or compensation to Client: SEBI may order the broker for reimbursement of financial losses faced by clients because of unauthorized trading.
- Initiate Forensic Audits: Forensic audits can be conducted against suspected unauthorized trading brokers. The audits help determine violations and loopholes in the compliance framework.
- Increase Compliance Requirements: SEBI can impose additional compliance obligations on brokers with a history of unauthorized trading.
- Restriction on the Broker: Limit the broker’s ability to trade on the client’s behalf, place orders, or access any specific markets.
- Issue Public Warnings: SEBI may issue public warnings against such brokers to warn and protect investors from such brokers.
- Conduct Regular Inspections of Brokers: Periodic inspection of brokers is a must. SEBI reviews compliance records, trading practices, and internal controls.
Conclusion
Lastly, clients who have suffered losses as a result of unauthorized trading by stock brokers have many rights and choices for filing complaints to seek compensation and legal action.
Being aware of these rights can assist investors in safeguarding their interests and money. Additionally, SEBI regulations and penalties for such trading can significantly reduce the rate at which illicit trading increases.
As a word of precaution always read the terms and conditions carefully before signing any document related to opening a trading account on trading platforms. Avoid giving any such trading rights to brokers to keep your money protected.
If you have also been a victim of unauthorized trading and have suffered multiple losses as a consequence of the broker’s uninformed decisions and refusal to engage in such activities, and you are not sure of what measures to take to recover your losses, please fill in your details in the form below and the callback will be arranged in no time.
