Investors duped by Unicorn securities are being made to run from pillar to post for grievance redress. While the regulator and its touted SCORES acts like a post office, stock exchanges, who boast single screen national trading are making the hapless individual run from one office to another
UPDATE: Updated to add response from NSE.
Unickon Securities Pvt Ltd (formerly known as Unicon Securities) was expelled by National Stock Exchange (NSE) on 5 September 2014 for violating various stock broker norms. At that time, NSE had asked investors to file claims against Unicon Securities within three months. However, the maximum compensation limit per investor, if found due and payable out of the Investor Protection Fund (IPF) was Rs15 lakh, the bourse clarified.
Kumar (name changed), a UPSC student and investor filed a complaint before SEBI to get back his shares and cash balances worth Rs1.5 lakh from Unicon Securities. It has been now more than 10 months, and Kumar has neither received his money nor any shares in his demat account. In addition, he is being made to run from one office to another for getting his money back despite clear directions from SEBI to release certain amount to investors with claims of less than Rs10 lakh, during the claim proceeding itself from the Investor Protection Fund.
When Kumar first filed his complaint, SEBI, the post office, forwarded it to NSE's office in Delhi. It held one arbitration meeting at Delhi, attended by Kumar and issued a letter sanctioning a claim Rs86,696 based on their calculations.
The letter also stated that in case the broker fails to give Kumar his shares within seven days, then NSE will block the amount equal to prevailing price of the shares and release the fund as per SEBI directions (CIR/MRD/ICC/30/2013 dated 26.09.2013) to the investor.
According to the circular, if the member (broker) does not opt for arbitration, then the stock exchange would release the blocked amount to the investor after the seven day's timeframe. SEBI said, in case, the member opts for arbitration and the claim value admissible to the investor is not more than Rs10 lakh, the monetary relief from IPF would be given to the investor as per the case status (50% of the admissible claim value or Rs75,000, whichever is less).
During the arbitration meeting, representative of Unicon Securities also agreed to release Rs850, the outstanding balance in Kumar's account on submission of account closure form.
However, Kumar did not get any money and after several enquiries, NSE's Delhi office asked him to file fresh complaint before its Investor Grievance Redressal Committee (IGRC) at Mumbai. Kumar submitted his complaint along with all relevant documents.
Yet, time and again, he is asked to submit more documents without even acknowledging his submission or refunding his money from the IPF.
In an email reply, an official from NSE said its Delhi office had spoken with Kumar. The official said, "(Our) Delhi team spoke to Kumar and explained to him that since there are large number of claims the Defaulters Committee is looking into it and he will get his dues soon."
What is more frustrating in this whole episode is Kumar is a student and preparing for UPSC examination. After his graduation, he worked for about two years and whatever he could save, invested in the stock market. Now, with his little saving remaining in abeyance due to lethargic attitude of stock exchanges and the market regulator, Kumar is finding it difficult to even support his day-to-day life, forget about buying books for his studies.
An investor believes in his stockbroker and it is this trust element between that allows the investment to grow, depending upon the market conditions. However, when this trust is broken, the investor goes broke and nothing really happens to the broker. With stock exchanges (the first line of regulators) and market regulator Securities and Exchange Board of India (SEBI), either turning a blind eye or showing lethargic attitude, there rarely is any action against brokers. No wonder, every day we hear stories of losses suffered by investors from markets.
For resolving investor grievances, the market regulator has established the SEBI Complaints Redressal System (SCORES). SEBI and the two main stock exchanges, BSE and National Stock Exchange (NSE) continue to put out glowing reports about their successful redressal of complaints. Yet, inexplicably, investors are extremely unhappy, partly because their complaints go into a black hole and partly because the SEBI Act simply does not allow for it to provide damages or grant compensation, even by recovering the amounts from defaulting or fraudulent entities.
In most of the cases, SCORES merely acts like a post office and forwards investor complaints to the stock exchanges or the depositories. However, since there is no check on the outcome, investors, like Kumar, continue to suffer.
After NSE expelled Unicon Securities, on 10 December, SEBI barred the brokerage and its directors, Gajendra Nagpal and Ram Mohan Gupta and its two key management personnel, Pawan Dhanuka and Pritam Pandya from markets for violating various stockbroker norms.
In April 2014, Moneylife raised the issue of the broker's non-functioning trading platform. The broker was neither honouring payout requests from its investor customers not its customer services and offices were reachable. (Read: Has Unicon Securities shut shop?
As of 31 March 2014, there are 315 complaints registered by customers against Unicon Securities during FY2013-2014 on NSE, out of which 52% were not resolved.
The investors, who have their trading account with Unicon Securities were worried about their investments as they are not able to trade and withdraw money from their account. The non-existence of its customer services and offices too raised a question in April 2014 about what went wrong with Unicon Securities and when will the regulators step in? NSE took action against the brokerage only in September while SEBI barred Unicon Securities only in December 2014. However, this has not helped investors in any manner. There are several investors who had trading account with Unicon Securities and still waiting for their money and demat shares.
Hope the regulators wake up to the cries of helpless investors, especially those, whose trust is breached by the broker, and give timely justice.