Stock Broker Fraud Complaint: How to File in India

In India, stock market investing has seen an explosion on a yearly basis, with hundreds of thousands of newcomers entering equities, derivatives, and mutual funds on a yearly basis. While the bulk of registered brokers act professionally and ethically, stockbroker fraud cases continue to rise. Broker misconduct results in unauthorized loss of funds, unauthorized trading of accounts, and breach of client mandates.

As a victim of stock market fraud in India, understanding how to complete a broker complaint in India is crucial in assisting you with the recovery of your investment loss and defending your rights as an investor.

This informative post focuses on:

• Recognise broker fraud.

• Understand how to report stockbroker fraud in India.

• Outline how to file a SEBI complaint with instructions.

Review the court protections and how the system protects an investor.

Defining Stock Broker Fraud

Stockbroker fraud occurs when a broker or brokerage company takes illegal actions that cause financial harm to an investor and loses his or her money through dishonest and unethical means. Such actions constitute violations of the stock exchanges and protections or prohibitions afforded or set in place by the governmental entities in power.

Brokers in India must be registered with a governing body, the Securities and Exchange Board of India (SEBI). Reports that claim violations of SEBI in the actions of brokers, therefore, qualify as reportable misconduct.

Stock Broker Fraud in India

In filing an investor complaint, some fraud aside from stock tape fraud must be understood. Some of the most common frauds to be understood and noted when filing a complaint include the following:

1. Unawareness of Trading.

Trading that occurs without the investor’s knowledge or without the permission of the investor, who does not have a brokerage account.

2. Funds of a Client Without Authority.

Missing or with misplaced permission, using funds set aside in an account to be utilised in personal trading without permission.

3. False Assurance and Unclear Representations.

Brokers who make claims that there will be a guaranteed, set number return for trading, or that brokerage accounts controlled by them will have guaranteed profit to the extent that the trading will have no risk, are claiming to be brokers of the clients who, under any Trading or Indian Regulation, are not legally able to make such statements.

4. Manipulation of Accounts

This includes contract notes which are inconsistent, false account statements and undisclosed extra charges.

5. Withholding and Unjustified Delays of Withdrawals

This includes unreasonable withholding and delaying of requests to withdraw money or securities.

6. Churning

This is the act of buying and selling excessively in order to increase the broker's commission to the detriment of the investing returns.

The above are instances of stock market fraud in India and which should be reported to the regulatory authority.

 

 

When Should You Report a Broker Complaint in India?

This should be reported if:

- You see your broker executing a trade without your approval.

- You have some funds or shares which are unaccounted for.

- You are not getting a response to your complaints from customer service.

- Your trading statements do not correspond to your trading activity.

- You are facing undue delays in your requests for withdrawn funds.

Timeliness is key. For most complaints, the process works in the complainant's favour when they do it quickly.

Framework to Report Stock Broker Fraud in India

1. Gather The Evidence

Before making a formal complaint, make sure you have documentary evidence to support your complaint. This includes:

- Your Client and the Broker Agreement.

- Contract Notes.

- Your Bank Statements.

- Your Demat Statements.

- All relevant communications, which include Emails, recordings of Calls and WhatsApp messages.

The strength of the evidence you provide to support your claim will determine the success of the complaint that you are reporting.

Step 2: Complaint Filing with Broker First

According to SEBI, first, investors must contact the grievance redressal system/authority of the broker.

Draft a complaint (Via Email or Ticket system)

• Specify the issue, approximate date, and amount and include evidence

• Ensure to note the acknowledgment or ticket number.

• If there is no response after 30 days, move to the next step.
  
  

Step 3: Filing a SEBI complaint through the SCORES System

If after 30 days, there is still no resolution, the next step is to file a SEBI complaint.

What is SCORES?

SCORES (SEBI Complaints Redressal System) is a fully online grievance redressal system offered by SEBI.

Procedure to fill a complaint:

1. Go to the SCORES portal.

2. Register using your PAN and a functioning email address.

3. Choose “Stock Broker” as the Intermediary.

4. Elaborate on a description of the issue.

5. Add the relevant documents that support your case.

6. File the complaint

SEBI then forwards and follows up with the broker regarding the complaint. This is the most legitimate method of defending your rights and reporting stockbroker fraud.

Deadline for Filing Investor Complaint

Even though there is no definitive legal deadline, it is prudent to file your investor complaint within:

• 1 year of the event.

• As soon as possible, to facilitate a smoother and quicker resolution.

• Doing so will ultimately prevent unnecessary delays, as your complaint’s strength is directly proportional to the amount of time that has passed since the issue arose.
  
  

What happens after you file a SEBI Complaint?

Once you submit your SEBI complaint, the following processes take place if your complaint meets the criteria:

• Each broker has a designated timeline in which they need to submit a response to the complaint received.

• SEBI looks over the response.

• If your complaint is still unresolved, you will be able to escalate your complaint.

• SEBI is not a court and does not resolve complaints but ensures everyone follows the rules.
  
  

Stock Exchange Grievance Redressal Mechanism

If your unresolved complaint is still with SEBI, the next step for investors is to go directly to the stock exchange the broker operates under, either the NSE or the BSE.

Some of the features of the stock exchange are:

• Arbitration system.

• Investor protection fund.

• Quicker results than the court.

This step is important for serious stock market fraud cases in India.

Arbitration Process for Broker Disputes

Arbitration is the legal process involving the broker and the investor. Here are a few situations in which you should choose arbitration:

• There are significant financial losses.

• The broker is not cooperating.

• The situation involves complicated fraud.

What you should know is that arbitration awards are considered “legally binding”.

Can You File a Police Complaint Against a Stock Broker?

Yes, you can file a police complaint involving:

• Forgery

• Criminal breach of trust

• Cheating or fraud under the IPC.

It is important to note that you can file an FIR and also file other regulatory complaints, but regulatory complaints should be the first step to take for market-related disputes.

Investor Protection Laws in India

In India, there is a protection framework within

• The SEBI Act.

• The stock exchanges.

• The Investor Protection Fund (IPF).

• The Arbitration and Appellate Mechanisms.

These frameworks have been designed to protect from fraud by stock brokers.

Ways To Prevent Stockbroker Fraud

The best solution is to prevent a problem before having to file a complaint. You can do this by: 

• Trading only with SEBI-registered brokers.

• Not sharing your login credentials or OTP.

• Checking your contract notes.

• Not getting involved in schemes that guarantee returns.

• Keep your email and mobile phone alerts turned on.

This is double-edged, as fraud awareness begins and ends with stock market fraud India.

 

 

Conclusion

Investors aren't powerless when it comes to handling stockbroker fraud. Though it might feel like it, fraud is just the beginning of your troubles. Complain, and get yourself to justice. Regulations are here for your protection. With the aid of regulation and computerized systems, you can easily report stockbroker fraud and receive justice.

Delay no more in the case of fraud, such as trading without your authorisation, using your funds for things you might not agree to, or simply being dishonest. Making a timely broker complaint in India through SEBI and the stock exchanges makes a difference, gets your voice heard, and cleans the market for a better trading environment.

IPO refund not received? Read our detailed blog on how to receive your IPO refund.

 

DISCLAIMER: This blog is NOT any buy or sell recommendation. No investment or trading advice is given. The content is purely for educational and information purposes only. Always consult your eligible financial advisor for investment-related decisions.