In a default worth Rs. 2000 crore, Karvy has been banned by the market regulator for executing existing trades of the clients or to acquire new clients. It has been put forth that it in the default the broking company has allegedly sold client stocks pledged with it through associated entities.
And when you as a client or customer of broking firms confront such fraud, here are some of the things you need to do.
But before that the SEBI with full authority and the bourses are seen to suspend these defaulting entities.
1. One as a client dealing through these brokers i.e. undertaking their trades on the bourse in spot or derivative markets should check with the SEBI or exchange website and deal only through the SEBI registered brokers or sub-brokers.
2. Do ensure to take the contract note in respect of the transaction you carry out through the broker. At the same time verify the details on it such that time of trade, number, transaction price, name of the broker as well as the brokerage is mentioned distinctly.
3. Also, make it a point to cross check that any amount against the sale trade or securities in case you have bought them are credited into your demat account in a span of 48 hours.
These are some of the things you should note while trading through them. But if you happen to confront some default by them, you have the following recourse available with you:
Whatever be your grievance related to the broking firm, you need to report it to of the exchanges. In case the issue remains unsettled for 15 days time, the bourses on their own would refer the case to Investors' Grievances Redressal Committee (IGRC). Then if you are not convinced with the resolution provided at this stage, you can go with the arbitration process.
The process is available only in a case when the broker is not declared a defaulter or expelled by the exchange. Here through the application form, you need to initiate the process by paying the stock exchanges.
But if the broker has been expelled or declared a defaulter, an advertisement will be issued for raising claim. And the claim is settled through the defaulter's account by the defaulters' committee on a pro-rata basis. Nonetheless, if the amount falls short to meet the admitted claim amount, it is settled from the Investor Protection Fund as per the guidelines of the exchanges.