Broker Sold my shares without consent

[C. Sridhara]

I am doing online trading in F & O.

I am retired employee, doing this trading from last 4 years. In the recent Stock market crash I have lost my investment also.

On 22-Jan-2008,My broker has sent e-mail stating that "there is a major f&o margin violation and to transfer the funds online before market opens. Else broker is going to close out the open positions immediately after market opens,without further intimation."


All open positions are squared off later.

Now broker asking to clear off the balance amount.

After few days the Broker sold some of my shares available in cash segment without client's permission and adjusted towards debit balance.


The action taken by broker appears to be correct, as per the agreemnt.

Can any body throw light on the following

1. There are 2 types of margin amount, the broker collects from us.
a) initial margin amount
b) MTM margin amount.

a) Initial margin amount is the amount to open the future contract.
b) MTM margin amount is to pay by investor on daily basis, depending on the profit / loss.

Broker was supposed to collect only MTM margin amount by any other means and should not have touched initial margin as it is client's property. But squared off the open position, thus spoiled the client's chances of getting profit.

This is as per agreement.

1. If any body enters into agreemnt stating that one has to serve as a bonded labourer, such agreement is considered as illegal.
Likewise, if the broker closes the position without client's consent, is it legal?. Or Is such agreement valid?

2. After closing the open position, the market recovered. Now broker is asking to pay the balance amount. After making to encounter losses, is it legal to ask to pay the balance? If the squaring off by broker is legal, closing of position could have been done earlier itself. Why the broker has to wait till market goes down drastically? OR broker could have waited till market picksup.

3. For the balance amount , broker is charging interest and calling it as 'penal fee and service charges'. Is it legal to levy such chrages?

4. To recover dues, broker sold few shares of cash segment without client's consent. To recover dues of F&O, is it legal to sell shares available in cash segment.

I request all my friends to guide, "how to go about this?"

 

[jdm]

I am doing online trading in F & O.

I am retired employee, doing this trading from last 4 years. In the recent Stock market crash I have lost my investment also.

my condolences sir. i sincerely hope that your trading capital is just a fraction of your savings.

On 22-Jan-2008,My broker has sent e-mail stating that "there is a major f&o margin violation and to transfer the funds online before market opens. Else broker is going to close out the open positions immediately after market opens,without further intimation."


All open positions are squared off later.

yup, thats the rule of the game.

Now broker asking to clear off the balance amount.

yup, you owe him. he has every right to ask for his dues.

After few days the Broker sold some of my shares available in cash segment without client's permission and adjusted towards debit balance.


The action taken by broker appears to be correct, as per the agreemnt.

nothing illegal if it is already in black and white.

Can any body throw light on the following

1. There are 2 types of margin amount, the broker collects from us.
a) initial margin amount
b) MTM margin amount.

a) Initial margin amount is the amount to open the future contract.
b) MTM margin amount is to pay by investor on daily basis, depending on the profit / loss.

Broker was supposed to collect only MTM margin amount by any other means and should not have touched initial margin as it is client's property. But squared off the open position, thus spoiled the client's chances of getting profit.

initial margin is revised 6 times a day according to the volatility. low volatility = low margin, high volatility = high margin. in addition to MTM you got to pay the revised initial margin as perscribed by the exchange.

any shortfall and the broker has the right to close your position.

This is as per agreement.

1. If any body enters into agreemnt stating that one has to serve as a bonded labourer, such agreement is considered as illegal.

the agreements are generally very standardised in nature and usually at per with formats perscribed by sebi. dont think your agreement is anything special that what i or any other guy has signed with any broker. closing a position on accout of inadequate margin is a very standard feature, nothing illegal or illogical.

Likewise, if the broker closes the position without client's consent, is it legal?. Or Is such agreement valid?

he sent you a mail asking you for additional margin. if you have heeded (i.e. transfer the additional margin to the broker) then the broker cant square your position. but if you have not heeded, then the broker has every right to close your position. thats all as per the rule of the land.

2. After closing the open position, the market recovered. Now broker is asking to pay the balance amount. After making to encounter losses, is it legal to ask to pay the balance? If the squaring off by broker is legal, closing of position could have been done earlier itself. Why the broker has to wait till market goes down drastically? OR broker could have waited till market picksup.

as i already said you owe the broker. so he has the right to ask for his dues. secondly, on hindsight it is easy to say the broker could have waited. but what if the market fell by another n% points. he has to manage his risk in realtime.

3. For the balance amount , broker is charging interest and calling it as 'penal fee and service charges'. Is it legal to levy such chrages?

yup.

4. To recover dues, broker sold few shares of cash segment without client's consent. To recover dues of F&O, is it legal to sell shares available in cash segment.

as you already mentioned its all there in black and white. so no probs on that part.

I request all my friends to guide, "how to go about this?"

you can approach the investor grievance cell at nse. but i dont think it would work, as the first question they would ask is whether you have adequeate margin. if your answer is in -ive then dont really think the regulators gonna entertain any further.

i feel sorry sir, but then thats how things works. the market is ruthless.

 

[C. Sridhara]

Thank You jdm,
If the system is like that We have to act according to system

 

[jdm]

Thank You jdm,
If the system is like that We have to act according to system

yes sir.

even when one buys a shirt he hops 10 shops and looks into atlest 10 shirts in each shop before pinning on one. a shirt which perhaps will cost him 500 bucks. but when it comes to investing ppl are willing to spare their millions even without a glance, sometimes on mare tips. and thats the saddest part.

 

[ghoomnewala]

for c.sridhar
ref: your problems with the broker.
see a lawyer immly.
give legal notice and request for all relevant records.
this will clear up your doubts.
margins required are not a licence for brokers to sell off your property.
most likely,this broker may have extended credit to some large players--and
if they were unable to pay up,the broker is "taking it out" on smallish players like you.
at the very least,the broker will forget all about the ineterest/penal fees/service charges etc.
when extra margin is required,you are always given time--at best,one of your positions couild have been liquidated--at your order keeping in mind the timing etc.this may have been enough to satisfy the margin requirements.
as regards the mtm,that is at the end of the day--never the morning--because that depends on the closing prices for the day or your sell off price if earlier.
with the lower prices obtaining,the initial margin too is lower--a fact that we all tend to forget.thus,some amount is "left over" once prices decline.
anyway, a lawyer's notice and a complaint to sebi ought to be the starting point.

 

[Czar]

but you see his problem was that even after liquidating all his F&O position dues were still pending thus his equity portfolio was partly sold, so I guess the margins were wiped off, so no question of squaring 1 position.

Please be very careful in F&O whether your position is right or wrong 1 bad hour could ruin your finances... I agree with jdm on all counts. hope you recover your losses in the future but please invest in cash only is my sincere advice

though you could try haggling & threatening & maybe they would spare you of the extra charges, but I guess only in writing would do that, no amount of talking to mid-level people would do any good. but the reason they must be asking extra charges is that they must've paid the exchange on your behalf....

 

[bnsahu]

sir, there are great manipulatins in Indian Stock Market. Now NSE has become most untrusted stock exchange with the help of its members which do not have any principle.
it is the good time to think and expose the alls. In your case the broker sold your property/shares without your consent. No broker can take such steps. This rule is made by himself and NSE.. SEBI ALWAYS TELLS - NO OVERTRADING.. To lure customers/clients, brokers are giving unlimited trading limit. 1 ke badle 10 guna, 20 guna and unlimited. Any financial loss is borne by only the investor/trader. Although the brokers are earning huge amount - brokerage, using your money(magring) etc.. They are not performing their duties - only volume and brokerage.
In your case
-your broker must advise
-since you are a retired person and no permanent source of income, you should not trade in F&o..
-40% Delivery stock must be kept with suitable valuation and stoploss of total investment value.
-Since the market was in overbought, you must take cash at home.
-World markets was giving the singnals.

NO SUCH ADVICE FROM BROKERS AS THEY WANT TO HUGE BROKERAGE AND VOLUME.

-Now action of NSE :
NSE had never raised the margin in case of market was overbought.
No huge margin in HIGH PITCH.
Excessive margin in LOWER PITCH to kill the small players/investors/traders.

NSE ONLY HELPED TO BIG FISH TO EAT THE SMALLS.

SO BEWARE ALL THE INVESTORS, BROKERS ARE MANIPULATING THE RULES WITH THE HELP OF STOCK EXCHANGES.

I have also a case for study-
The broker - adroit financial,Delhi based - given unlimited (INTERNET SHARE) trading limit to my son - a beginner for a margin of Rs.5000/- (committed limit was RS.35000/-).
There was huge loss in trading in cash segment IN INTRA DAY.
The broker not followed rules of internet share trading. His software not approved by SEBI. SEBI IS MUM. No action.
NSE HAS HELPED ONLY THE BROKER. IN ARBITRATION CELL MY COUNTER CLAIM WERE OMITTED. MY SON LOST CAPITAL. THE BROKER IS STILL DOING HIS BUSINESS WITH HELP OF NSE.

WHAT ARE CASES - IN YOUR CASE MARGIN WAS SHORT,
SHARES WERE SOLD
AND THE LOSS WAS CLAIMED FROM THE INVESTOR.

IN MY CASE MARGIN WAS ONLY RS.5000/-
EXPOSURE LIMIT WAS GIVEN UNLIMITED IN PLACE OF RS.35000/-
TO A BEGINNER TO EARN HUGE BROKERAGE WITHOUT JUDGING THE
INCOME OF INVESTOR/TRADER.
AND THE LOSS WAS CLAIMED FROM THE INVESTOR..


IN EVERY CASE THE INVESTOR WAS BUTCHERED/KILLED.
THE BROKER/NSE ARE ENJOYING THE GAME..

 

[DWeeP]

Dear sir,

I think u already got answers, but still i suggest that u should try writing to SEBI (sebi.gov.in) in complaints section http://www.sebi.gov.in/Complaint.html
No matter what may be outcome. just write to sebi.

NSE always favors brokers. so everyone should choose brokers wisely after doing enough research. I think such problems might occur less commonly with large online brokers like icici, sharekhan etc.

Also pls give the name of your broker so other users can stay alert and may be avoid trading with him.

I never trade in F & O and believe that they are only for Mutual Funds and some knowledged large players.


Very important: If u came to this thread via PM from saurabh_forever, pls visit my thread in General Section and Pls change your id/pass immediately. It was a hacking(phishing) attempt.

 

[melwani]

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