ValuePickr Forum

Story of a man's life savings wiped out by Motilal Oswal?

Do you guys think going with a broker who is also a big bank like ICICI/kotak is safer?

Also, I think these things happen more when the accounts are dormant. My father had a small unauthorized trading done by IIFL when the account was dormant for 4 years.

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Icici seems to be pretty clean. No issues for last 13 years

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Thought it would be worthwhile to share how I have structured my investments with respect to accounts for some folks here and also get some feedback on whether this is a ‘safe’ construct.

My primary demat, trading and savings account are all with ICICI. It has been so since around 2005 (although I had just entered college then). I have the same setup for my wife ie 3 in 1 account.

Apart from this I have an account with Yes bank and IIFL (this was opened in the days when YES Securities did not exist). I used to hold shares in it but no more. I have kept this as a backup to buy in case ICICI is down for some unkown reason and offcourse when things are on a fire sale.

In addition when I speculated :wink: I used to use RKSV but only Nifty futures and rarely options. My lifetime options book has been in red. I have moved on from this years ago. But I stil have a Zerodha account for equities, fno and even commodity (I am resisting signing a POA and want to use it only for futures trade just in case of extreme events.). The only reason I maintain this is for the rare chance when I buy or sell futures.

I have spread my savings with multiple banks and dont hold much in my ICICI linked account purposely.

I agree that ICICIDIRECT is the costliest out there. But it has two distinct advantages - convenience and reliability.

Feedback welcome :slight_smile:

Regards
DV

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I have had 5 ICICI direct accounts in my family for about 2 decades. I am
totally satisfied. Never experienced any safety issue. However, I handle
all accounts my self.Would never authorize any of the relationship
managers etc of ICICI to trade on my behalf.

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I have icici 3 in 1 accont for 9 years. No issues till now

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isn’t it high on fees?

I also have icici bank 3 in 1 three accounts in the family which I manage. I have found it to be quite reliable and safe in last 12 years or so. I have subscribed to the prepaid brokerage ie 0.35%. They have a complicated way of deducting the brokerage. ie initially they deduct the full brokerage and then they refund the extra deducted. I usually don’t check all the time whether they refund it correctly. When ever I checked, it was OK. The brokerage is definitely high. But since I do only investment for long hold, it is OK…

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Thank you for the detailed analysis and the clarifications. I think one of the important take-home messages, is that no matter what, every person with a demat account involved in trading has to understand what a broker is doing on a regular basis. We have to keep the checks ourselves.

I maintain a single demat account with Integrated Enterprises. I am very happy with their services, the system of checks etc - BUT - past lessons learnt I check my status on a daily/alternate day basis. Seek clarifications and jump in whenever there is something I do not agree with.

Trust no one - has become my motto as a novice investor

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I get sms from stock exchange at the end of each day about trade I have done. Also, get email contract note and pretty much by checking these two, we are able to find out if anything wrong has happened.

I think this is the critical point. All on this platform are probably active investors. We look regularly at whats going on. However our parents, relations, friends, associates may not be.

They may not check the their accounts regularly. This is an open door for the evil eye.

By the time they/we do check the accounts, the damage is done to us.

@vij Thank you for sharing. I am forwarding to those I do know who may not monitor regularly.

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Any one having experience of Aditya Birla Money? would like to know if any one is a user.

Please create account in NSDL or CDSL (as applicable). They allow you to view all your consolidated holdings. NSDL IDeAS sends quarterly emails also. CDSL equivalent is CAS.

I have been using Sharekhan for past 8-9 years and no issue seen. Recently opened new account for my wife in Zerodha and apart from the occasional website glitches earlier, have not faced any issues. Both send email/sms updates.

There is a similar case of Angel Broking vs Sharda Kapur.
Angel broking traded in ‘futures trading’ without the permission of Sharda Kapur (in her place) and resulted in a huge loss for Sharda. Sharda petited a file in Delhi high court, where Angel broking was ordered to payback Rs 21 lakhs (along with Rs 5 lakhs compensation).
Read more here: https://indiankanoon.org/doc/33711800/

I have account with Sharekhan since the past ten years and never had any issues. Brokerage is moderate, but rest all things are clean.

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Sharing my hilarious experience with Motilal Oswal:

I am a fan of Ramdeo Agarwal and so decided to open a Demat Account in Motilal Oswal.

The account got opened in a couple of days and I got a welcome message in my email. My name was spelled “PANRAJ” instead of “PANKAJ” but I thought it to be typing error and overlooked it.

Then I brought a few shares from that account.
2 days later I noticed that the name was actually “PANRAJ” in each email communication and attachment and also on their website.

I went to their office to get it rectified. They asked me to submit a “Change of Name” form along with PAN Card and Aadhar Card copy. I tried to reason that it was their mistake and not really a change of name. But they said since this is the data with the depositories, I will have to submit this form. So I got convinced and submitted a change of name form. They said they will process the changes today itself and the updated data will be reflected by tomorrow.

As I was looking at the screen of the person checking my data, I saw the Gender was marked as “Female”. I asked to see the entire information and noticed another error in Address. They had invented a new Wing “O” which does not exist in my society and abbreviated 4 more words. They said everything will be corrected today and reflected by tomorrow.

But, 6 days later, there was no change in name. So I sold the shares, withdrew my money and decided to close the account by filling up this closure form from their website:

When I submitted the form, they said this is not correct form and gave me another one.
They said, I will get acknowledgement by email.

A day later, I got a call from them saying the name in the closing form does not match the name in their records. I tell them the name in their records is wrong because of which I had submitted a “Change of Name” form a week back to correct it. The person says they do not have records of such a form from me. He tells me - Let us submit the closure form with the correct name “PANKAJ”. However, if it gets rejected, we will need to resubmit with the wrong name “PANRAJ”.

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Indeed a very thought provoking article and thread. I read the thread and the article, few questions that come to mind. It would be really helpful if anyone can throw some light on them…

  1. As per article the person’s entire portfolio got liquidated, meaning they were sold to pay off his debt to the broker. Now how did this debt get created in first place. It could be that the broker traded F&O and created huge debt out of loss (obviously without his consent). Now, for the broker to trade F&O in big amount, an initial capital would be needed. The broker created this capital by allocating money from the person’s linked bank account. (Is this possible?) OR the broker first sold part of shares held by the person in DMAT account to create that initial capital for subsequent trades?
  2. OR the broker created totally forged and false debt of the person and simply sold his hsares to enable him to pay off that debt?
  3. Why did the person not lodged an FIR in the very first instance on the person involved (manager of DP) as a direct case of cyber crime and unauthorized access to his financial instruments. Even if he had signed a PoA initially (I think when we open trading account with DP, we all have to sign PoA to enable them to carry out trades on our behalf - Now that should not include trade via phone (unless we have activated phone trading, have created phone password and calling from registered mobile) or without giving any recorded instructions. This is clearly a case of cyber crime/crime and Police should have been involved immediately. What are your thoughts and do you think involving cyber crime cell or Police would change the course of action and subsequent decisions? SEBI is just a regulator, while Crime cell is the law enforcer. Pls correct me if I am wrong here?
  4. Do anyone remember and clearly understand what PoA do these brokers make us sign when we open Trading accounts (or 3 in 1 accounts) with them? In case of property, PoA rules are very strict and they should be registered in court to carry any value. Is there no rules governing PoA in case of shares trading by these bankers?
  5. Many times now-a-days we keep getting pop ups in brokers websites to accept new agreements etc. which are 10 or 20 pages or more long documents. Should we accept such pop ups or do not?
  6. Last but not least, is there a way to simply cut off the Trading account from our DMAT account (in case of 3 in 1 accounts) to keep the shares we want to hold as coffee can simply unable to trade (even for us) until we reconnect hem to any trading account? (Has anyone done that?). Can we close the Trading account out of the 3 in 1 accounts we created (keep the DMAT and Bank A/C open)…The Deallocate or Hold option of shares is of no use. If Brokers can do unauthorized trade, they can very well do unauthorized allocate and release.

Thanks

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@zygo23554 @Vijay_Kiran @deevee @Malkd @Chins @gurjota @sahil_vi @dd1474 @stockcollector @kb_snn
All seniors & active members here and anyone I missed, would be great to get feedback on above important questions that we all long term investors should be aware of!

Also an additional point has come now -

  1. with new SEBI rules on margin/collateral only via OTP - how will it affect the unauthorized trading even if PoA is signed? In short, if we have negligible money in our linked bank account and do not provide OTP, can still any broker carry out F&O trades on our behalf using our shares as collateral or sell our shares first to carry out subsequent unauthorized trades?

I think with the amount of focus by SEBI and stock exchanges around investor protection and safeguarding interests of retail shareholders, these sort of cases should be a distant memory especially if you’ve signed up with any of the well established top brokers in India. And with the new age discount brokers like Zerodha (also being India’s no.1 broker) offering free cash delivery, I see no reason why people would not go with them. Plus, I assume most of them have a solid debt free balance sheet (certainly Zerodha does) whilst ensuring compliance with all SEBI / exchange rules and regulations.

In terms of what all you can do, here are a few things that should help:

  1. Without POA - Now a days, we don’t even need to give the POA to Zerodha and can sell your shares using OTP based authentication
  1. With POA - If given a POA to broker, I believe you can freeze your holdings with the DP directly. I’ve not tried this myself, let us know if this works

Overall, I think with the age of social media, knowledge and information spreads like wildfire and most young investors are a lot more aware about demat account operations, POA, etc. I don’t think it’d be so easy for well established trusted brokers to get away with things they might have done in the past.

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Thanks for the info - its a start! I would suggest never write off any possibility and prepare for the worst. It will happen with minority and with loopholes in system, the minority can be anyone. Only safeguard is to acknowledge the risk and be prepared rather than depend on the manual checks like check email, keep track etc etc.
I really liked two things to which you pointed and checked more details… e-dis is a good facility to seamlessly invest without PoA…but seems once you have given PoA to broker, you cannot revoke it and move to e-dis option of NSDL/CDSL. This is strange but thats what I found online. maybe if we threat the broker of closing account with them then they give option to revoke PoA and move to e-dis.

Secondly, the option of freeze dmat shares until we need to sell is also sounding decent option. I checked in NSDL - Although some article suggested that even NSDL has this option but on logging to IDEAS website of NSDL, could not see this option anywhere. I must say the more I dig into this, the entire system looks like a complicated mesh to me and huge scope of simplifying things like Banking or even better…Its pity the system of trading, share delivery, clearing members etc. seem archaic to me when everything else is moving to a D2C system…

I am surprised why seniors have nothing to say on this important aspect. Are we ignoring this risk thinking it cannot happen to us :slight_smile:

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Amigo, I really feel the pain and anguish of the small retail investors. What option is left with him to deal with the loss on account of fraud by broker needs to be exercised quickly like FIR, written complaints to all and sundry regulating bodies, move court etc. This will amount to another mental torture and wastage of precious time but needs to be done as a first step.

I prefer to be safe than sorry and hence never did any F&O transactions in my investing journey of nearly two decades and never intent to do so. Secondly I keep printout of all documents signed and submitted. I learned about broker scam very early during 2008-2009 timeframe when many such issues emerged that time mostly in Chennai and around. I thought better to pay some delivery charge to establish broker like ICICI than to fall prey to cheap ones. Luckily there wasn’t any issue with my old broker except higher brokerage fees. This is No recommendations however.

Please evaluate risks always in investing. Don’t assume anything. Keep on toes about such practices. If one is from middle class or lower then he has to keep patience and believe in hard work and not in rags to rich story in quick time. A generation has to sacrifice their life and comfort in order to make future progeny wealthy. Wealth is more to do with luck and good karma than to skills. Most of the skills are overrated because odds of success is rare against the available options. A success in one is no guarantee in another.

Keep balance and peace within. And stay in course. Thank you.

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