It would appear that 'temporary' use of clients' holdings is quite common. Obviously, being able to use other people's money is a great temptation and quite hard to resist! Investors need to remain vigilant as unscrupulous brokers intent on cheating with the recent ones.
A lot of investors, like me, are just interested in buying stocks against full payment and holding them for months and years. I can't understand why such investors have to sign over power of attorney rights to their investments to brokers.
I could set up things in such a way that I might be able to trade in equities without giving the broker the power of attorney. What should be the default offered to new investors is actually secret knowledge that is carefully obscured and is only discoverable with some effort!
If you do not give PoA to anyone, you are the sole operator of your demat account.
This is the safest way i.e. by transferring the shares manually to the broker's personal demat account:
Buy this option is not practical in online trading. If you sell the share today, you have to transfer the share to the broker's demat account by next working day so that he can deliver them to the buyer. If you fail to do that, it is broker's obligation to provide the shares to the buyer. If can the share doesn't reach to the broker in-time, he has to buy them from the market and settle the transaction. This may result in penalties to you. You also have to pay the difference in the prices.
With this crirsis hopeful SEBI will come up with polices that will help to overcome the above hurdle.
A lot of investors, like me, are just interested in buying stocks against full payment and holding them for months and years. I can't understand why such investors have to sign over power of attorney rights to their investments to brokers.
I could set up things in such a way that I might be able to trade in equities without giving the broker the power of attorney. What should be the default offered to new investors is actually secret knowledge that is carefully obscured and is only discoverable with some effort!
If you do not give PoA to anyone, you are the sole operator of your demat account.
This is the safest way i.e. by transferring the shares manually to the broker's personal demat account:
Buy this option is not practical in online trading. If you sell the share today, you have to transfer the share to the broker's demat account by next working day so that he can deliver them to the buyer. If you fail to do that, it is broker's obligation to provide the shares to the buyer. If can the share doesn't reach to the broker in-time, he has to buy them from the market and settle the transaction. This may result in penalties to you. You also have to pay the difference in the prices.
With this crirsis hopeful SEBI will come up with polices that will help to overcome the above hurdle.
