Insecure about your investments with brokers? These measures will help you safeguard pledged shares

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@ Vikas Sharma | Sr Journalist

In wake of recent incidents where client shares pledged with market intermediaries were mishandled, Reliance Securities ED and CEO Lav Chaturvedi says some effective measures like keeping track of all credits made by the broker, parking all non-cash collaterals only in their DP accounts and ask for all statements during payouts, can help investors safeguard their securities.
“In the past year alone there have been incidents which shook the confidence of investors and raised their doubts about how safe their investments were with the market intermediaries they placed their faith on,” Chaturvedi said.
While noting that India’s regulatory framework is extremely robust and efficient in arresting fraudulent activities, Chaturvedi says investors particularly those entering the capital markets for the first time should personally take appropriate measures to prevent from being defrauded and manipulated by brokers.
According to Chaturvedi, the first thing the investor should do is to ensure that their broker is crediting the securities to their dematarialisedaccount on the pay-out day even if they are not fully paid. Second, investors should only include clauses as directed by the regulatory authorities in thePower of Attorney (POA) given by them to the broker and ensure that no additional clauses are provided by the broker.
Third, any upfront margins that investors may have provided through non-cash collaterals should be strictly kept in their own depository participants (DP) accounts. Moreover, securities pledged under SEBI-prescribed ‘Margin Trading Funding’ (MTF) facility should be clearly displayed as collaterals along with the positions on the trading portal.
Additionally, investors should ensure thatbrokers comply with the norms of moving surplus funds and securities lying with them in defined frequency at all points in time. They should also seek fund’s ledger statement, securities ledger statement and retention statement at time of payouts.
Investors should get notified of all the transactions on real-time basis and should frequently log in to their trading portals to check on reports, trade book, demat transactions, among others.

Meanwhile, Chaturvedi also said investors should select brokers with atleast a decade of established track record.

Lastly, the broker needs to become a partner for investors on whom they can completely trust for managing their financial wellness.

Chaturvedi stresses that investors should be prepared to replace their brokers “in case of even iota of doubt”.

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