While not an expert on trading, I keep my life simple. I have 3 in 1 account with HDFC Bank/Securities since last decade. I also have relationship with Isec (since 2002) and Zerodha. However, I am layman and do not understand complexity in Derivatives. Hence, would have done around 20 trades in derivative (only options, never traded in future, with cumulative loss of Rs 30K) over 25 years investing period (with Last derivative trade by me in FY2013).
Having said that, I am very particular about fund/securities dealing in my demat and bank account. I check very frequently in case I have traded about receipt of funds/shares. By doing this, while there is chance that someone can play and incur loss on my account, the maximum period for same would be around 3-5 days. So there is probability that I could be subject to such events, however I assign low probability to such event.
In nutshell, dealing with reputed intermediaries and regular follow up are my weapon to fight such causalities. Golden principle which I apply to my investment word which we regularly listen on Railway platform" Yatri Apne Saman Ke Khud Jimmedar Hai".
My apology for not being able to give better insights, but I have no experience to comment on same.
Firstly thanks a lot for replying and adding to this aspect which we would mostly neglect or have at back of our mind until we are a victim. Thanks!
Reading such reports online, I see that even if the victims do not trade in derivatives or F&O themselves, the brokers/sub brokers/managers have done on their behalf on pretext of having approvals, mostly telephonic by bringing forward only part of calls or calls which do not present true picture. So I strongly feel that ourselves not engaging in trading, derivatives etc. will not safeguard us against unauthorized trading UNLESS we block this feature from our trading account - If at all that is possible? (I will try to find out)
F&O etc segments, the brokers can trade multi X the amount available. In reports, they have traded and brought to loss sufficient amount to empty the long term holdings of the victims. I am not sure why such products are encouraged by SEBI but rather should be slowly banned…most recently I got an email on covered calls where one can play 50X…although I never trade but what this means is that someone can do a 50X unauthorized trade on their victims - irrespective of whether they themselves Trade or not!!
Now coming to the two beautiful options that @gurjota has introduced us to - eDis & Freezing dmat shares - These can protect the DP from selling the victim’s shares BUT cannot protect from unauthorized Trades in F&O etc. It is only when the brokers who engage in such activities book loss and then they try to sell the victim’s holdings, they would not be able to…so in this case the brokers would go to court against the victim than vice versa. So in short chances are, they would not chose such a victim who has opted for eDis or DMAT freeze options as they would know that liquidating his/her assets would be a problem for them. So, this would be a slightly better problem to have for a victim and his/her chances of becoming a victim may also substantially go down.
The issue of unauthorized trade would still remain - unless there is option to completely block F&O, derivatives, intra day etc from our Trading accounts and use it only as an Investor delivery based account…If that is possible at DP level.
It is scary of thinking as a victim, but thats what we need to do in order to identify best approach other than manual checks…as there can be “n” number of reasons we may not be able to do those checks for things out of our control.
@gurjota - I did some more digging into this. Seems the option to freeze shares in DMAT for debit would only be available if we use the Speed-e service of NSDL. This is the service of e-DIS similar to EASIEST of CDSL. I tried to activate this service in NSDL but faced a roadblock. We need to provide CM BP ID there - This is hilarious as NSDL is asking a poor retail investor of such big IDs before he can even avail this service.
Spent a long time in understanding what this important ID is. CM BP ID is Clearing Member Business Partner ID. There are Clearing members linked to every DP and they have unique accounts for each DP. So, I tried to find this ID for my DP. Surprisingly, it is not mentioned anywhere. Neither in their website nor after login.
I read further and it was mentioned that CM BP ID is mandatory to be present in the contract notes that the DP emails us after a delivery buying/selling. I checked those also but still no information there as well. There was SEBI registration number but no CM BP ID in the contract notes. And this is case of at least two DPs that I checked.
Any info from anyone on how to find CM BP ID for each DP - at least the major ones, would be appreciated. My search is on…
Sorry I don’t have much to add, but Nithin Kamath posted his thoughts a while ago during the whole GME debacle, which also is relevant to the security measures in place.
Sounds like the broker of the franchisee branch of Motilal oswal did some derivatives trading on behalf of the investor without his knowledge and the losses incurred led to sale of his equity investments…
My mother used to have an account with a motilal oswal franchise and a broker friend used to buy shares on her behalf! I still remember - reliance power (!!) was bought at 84. I was so angry that my mother would buy such a stock. This was followed by buy of shipping corporation of india. They never used to charge annual fees or anything like that, but they were selling her stocks on a regular basis to make up for the fees - this was without our knowledge…When I came to know about this I asked the broker to sell everything and closed the account…
I then opened an account for her with hdfc securities and I have had no issues with them since 2014. I have been managing her investments ever since and I am providing her with regular income every month from dividends from her investments…
My personal account is also with hdfc sec. Firms like hdfc don’t follow franchisee model and is much safer for retail investors like us. Their brokers won’t transact from your account without your knowledge or permission - if they do they will be fired.
Franchisee branches of brokerages are risky…
Issue of PoA - I am not an expert. If in doubt, it is better to involve a lawyer who is experienced and who has good understanding of capital markets to go through the documents before you sign
