Banking
Personal Finance Exclusive
When Banks Cheat Customers
Stanchart robs a doctor in Kolkata with churning and forgery. Will RBI act?
 
Dr Abhik De, a highly qualified doctor in Kolkata, had an account with Standard Chartered Bank. Since 2005, the Bank also managed his mutual fund investment which was Rs1.56 crore in 15 schemes. In a 19-month period after May 2008, Stanchart switched and churned his portfolio over 200 times causing a massive loss of Rs68.28 lakh. In so doing, the Bank often forged signatures on transaction slips. At least 50 transactions in July-August 2009, all loss-making, were a give-away since he was out of the country. Dr De confirmed the forgery by writing to each mutual fund and seeking photocopies of transaction slips. Dr De says that some of the forged signatures were even attested by Stanchart officials. When he complained, the Bank initially dismissed his complaint as false and frivolous. 
 
A reckless churning of mutual funds to earn commissions as well as entry- and exit-loads can only happen when there is a nexus between ‘wealth managers’ and the fund managers. Dr De complained to the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI) but got nowhere. Over the past four years, he has slowly gathered enough evidence to file a police complaint.  
 
Dr De describes the attitude of regulators succinctly and colourfully. He says, “If a person is murdered with an unlicensed revolver, the judge does not ask for the source of the weapon. He conducts a murder trial.” Our regulators have all been focused on trivial technicalities rather than justice even when violation of their own regulations is very clear. 
 
Stanchart’s actions are a direct violation of SEBI’s prohibition of fraudulent and unfair trading practices regulations, as well as the code of conduct for mutual fund intermediaries. Readers would recall that Moneylife’s relentless pressure ensured SEBI action against HSBC in a similar case of churning involving singer-actress Suchitra Krishnamoorthi. The actress was eventually paid Rs1.3 crore by HSBC as a settlement. But SEBI has done nothing to help Abhik De.
 
Finally, the Kolkata police registered a first information report (FIR) based on his complaint in 2014. It caused Stanchart to wake up at long last. The Bank sacked its relationship manager and unilaterally transferred Rs35 lakh into Dr De’s account (November 2014) calling it a “full and final satisfaction of all claims, demands and contentions raised by you.” Adding insult to injury, it called this a “goodwill gesture to maintain cordial relations” with its victim. Obviously, Dr De is in no mood to accept or give up the battle. 
 
The question is why did RBI fail to redress the complaint? An ordinary consumer who cannot repay a small loan or defaults on credit card is declared a defaulter and his financial life is crippled. But a bank decimating a person’s savings through mis-selling faces no action. The collective clout of banks has swung the pendulum of justice far against the ordinary consumer. This cannot go on. RBI’s consumer charter, issued in 2014, is supposed to protect people from such brazen mis-selling. RBI must make an example of Dr De’s case. Awarding exemplary punishment will show that it is serious about fair treatment of consumers.
 
 
 

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COMMENTS

Abhik De

1 year ago

Since SEBI is the market watchdog , the control and regulations come within your domain and one of the Banks which has taken necessary permission and license from your end to do mutual fund business, has committed such cheating and forgery. Therefore I do expect that you will direct your concerned officers to initiate an appropriate enquiry,and reopen the case as in case of Ms.Suchitra Krishnamoorty vs.HSBC CASE,our case is Xerox copy of the same case and take necessary steps against the erring bank and Mutual Funds for acting in collusion,vide your guidelines/codes formulated to protect the rights and interest of investors.

Abhik De

1 year ago

The StanChart bank violated the provisions of Regulations 3 (a), (b), (c) and (d) and 4(1) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 and SEBI’s Circular No. MFD/CIR/06/210/2002 dated June 26, 2002 prescribed under Regulation 77 of the SEBI(Mutual Funds) Regulations, 1996 read with Clauses 1, 9 and 13 of the Code of Conduct of Intermediaries of Mutual Funds. There was violation of Code of Conduct for Mutual Fund Distributors, SEBI (Prohibition of Fraudulent and Unfair Trade Practices) PFUTP Regulations, 2003 (hereinafter referred to as 'PFUTP Regulations') and SEBI Act, 1992 by the StanChart bank with regard to the Mutual Fund transactions done on behalf of the complainant.

Abhik De

1 year ago

After the F.I.R.has been filed and during the course of the investigation,by police authority, the Bank had sent a letter dated November 24, 2014 wherein they stated – “The Bank has given due consideration and examined these issues and has decided to pay you a sum of Rs.35, 00,000/-- (Rupees Thirty Five Lacs) in full and final satisfaction of any or all of your claims, demands and contentions raised by you against the Bank ("Claims"). We have therefore credited your account no. 322-1-013831-2 on 24th November 2014 held with us at Bidhan Sarani Branch Kolkata with the said sum of Rs. Rs.35,00,000/- (Rupees Thirty Five Lacs).”. This decision to credit the amount was unilateral,without giving any details of payment and attempt to wash the hands off by paying this meagre amount after cheating me to the tune of Crores.
The bank in the said letter also claimed – “This payment has been made by the Bank as a goodwill gesture and to maintain cordial relationship with you. The payment of this amount should not in any way be construed as admission of any fault or default or failure or offensive act on the part of the Bank or any of its officers”. These statements itself is an admission of guilt. Goodwill gesture after 4yrs.,that too post police complaint is self explanatory.The bank must pay us back the balance amount with interest.Appropriate penal action should be taken against S.C.B.,AMCs who in connivance facilitated churning,and violated all guidelines.Should stop dealing with S.C.B.Licence of StanChart should be put to on hold to sell mutual fund products till our grievances are amiccably redessed.
Hope regulator/R.B.I.noticing.Please showcause StanChart as in Ms.Krishnamoorty vs.HSBC case.Both are similar.

Abhik De

1 year ago

After the F.I.R.has been filed and during the course of the investigation,by police authority, the Bank had sent a letter dated November 24, 2014 wherein they stated – “The Bank has given due consideration and examined these issues and has decided to pay you a sum of Rs.35, 00,000/-- (Rupees Thirty Five Lacs) in full and final satisfaction of any or all of your claims, demands and contentions raised by you against the Bank ("Claims"). We have therefore credited your account no. 322-1-013831-2 on 24th November 2014 held with us at Bidhan Sarani Branch Kolkata with the said sum of Rs. Rs.35,00,000/- (Rupees Thirty Five Lacs).”. This decision to credit the amount was unilateral,without giving any details of payment and attempt to wash the hands off by paying this meagre amount after cheating me to the tune of Crores.
The bank in the said letter also claimed – “This payment has been made by the Bank as a goodwill gesture and to maintain cordial relationship with you. The payment of this amount should not in any way be construed as admission of any fault or default or failure or offensive act on the part of the Bank or any of its officers”. These statements itself is an admission of guilt. Goodwill gesture after 4yrs.,that too post police complaint is self explanatory.The bank must pay us back the balance amount with interest.Appropriate penal action should be taken against S.C.B.,AMCs who in connivance facilitated churning,and violated all guidelines.Should stop dealing with S.C.B.Licence of StanChart should be put to on hold to sell mutual fund products till our grievances are amiccably redessed.
Hope regulator/R.B.I.noticing.Please showcause StanChart as in Ms.Krishnamoorty vs.HSBC case.Both are similar.

Abhik De

1 year ago

StanChart bank is a registered Association of Mutual Funds India (AMFI) distributor with No.ARN-1209. Accordingly,it violated all codes/guidelines ,formulated by AMFI/SEBI,mentioned in previous postings/and to the regulator and trade body.But who cares.

Abhik De

1 year ago

Funnily enough all codes/guidelines formulated by the regulators/statutory/trade bodies to protect the interest of investors.But in reality,reverse is happenning in our case.Just protect the interest of large distributor/intermediary at any cost.

Abhik De

1 year ago

It should be noted,the HSBC bank was show caused by SEBI,in the capacity of Mutual Fund distibutor,as mentioned in the last few lines of the order:Transactions undertaken by the Noticee(HSBC) in relation with the complainant were in its capacity
as Mutual fund distributor and not as a portfolio manager.Strangely enough,the regulator failed to act against StanChart bank on the same ground,which violating all norms present on earth to protect the rights &interest of investors.Arent they supposed to be the custodian of investors'funds!Our endeavour will continue, till The StanChart bank faces the same fate as HSBC i.e.atleast show cause notice/penal action.

Abhik De

1 year ago

The StanChart bank violated the provisions of Regulations 3 (a), (b), (c) and (d) and 4(1) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 and SEBI’s Circular No. MFD/CIR/06/210/2002 dated June 26, 2002 prescribed under Regulation 77 of the SEBI(Mutual Funds) Regulations, 1996 read with Clauses 1, 9 and 13 of the Code of Conduct of Intermediaries of Mutual Funds.Will the regulator act?

Abhik De

1 year ago

We have approached SEBI to redress our grievances. Your kind attention is invited to SEBI Circular Number SEBI/IMD/CIR NO. 8/174648/2009 dated August 27, 2009 wherein in para 9 of CODE OF CONDUCT FOR INTERMEDIARIES OF MUTUAL FUND it is clearly stated as under:

9. Avoid commission driven malpractices such as :

(a) Recommending inappropriate products solely because the intermediary is getting higher commissions therefrom.

(b) Encouraging over transacting and churning of Mutual Fund investments to earn higher commissions, even in they mean higher transaction costs and tax for investors.

We reproduce hereunder point number 4 of above mentioned SEBI Circular dated August 27, 2009:

4. It is advised that all intermediaries of mutual funds units shall follow the code of conduct strictly. If any intermediary does not comply with the code of conduct, the Mutual Fund shall report it to AMFI and SEBI. No mutual fund shall deal with those intermediaries who do not follow code of conduct.

We had time again asked Mutual Funds and AMFI to bar Standard Chartered Bank from selling Mutual fund products since they have violated SEBI Guidelines by over transacting and churning of our mutual fund portfolio, but only to deaf ears. And now to our utter surprise SEBI is asking us to file an FIR with the police department for redressal of our grievances. We have been subjected to churning, forgery was to facilitate the same. It is same as murder taking place with an unlicensed revolver, Judiciary never asks for the source of revolver. Main concern of judiciary is to bring the criminal to book. We similarly expect SEBI to ascertain whether churning has taken place or not and if yes than to follow there circular and take necessary actions against Standard Chartered Bank for violation of guidelines.

Waiting for a proper reply from your end.

Abhik De

1 year ago

• Standard Chartered bank as an intermediary have breached code of conduct as specified by AMFI.
• Para 3.9 relating to code of conduct for Intermediaries clearly state that an intermediary should avoid commission driven malpractices such as :

(a) Recommending inappropriate products solely because the intermediary Is getting higher commissions therefrom.
(b) encouraging over transacting and churning of Mutual fund investments to earn higher commissions, even if they mean higher transaction costs and tax for the investor.
Our complaint was with respect to Standard Chartered Bank an intermediary for sale of Mutual fund schemes. They have violated all guidelines by churning our mutual fund portfolio and forging signatures on the transaction slips resulting in big financial loss to us. For reasons beyond our comprehension it seems that AMFI is only to facilitate income of the intermediaries even at the cost of investors. Morever we are of the opinion that AMFI only requests the intermediaries to follow code of conduct but does not take any action if such code of conduct is breached to facilitate there income at the cost of investor. This is very much evident from the introductory statement of Mr. A.P. KURIAN, Chairman AMFI where it is requested as follows:

“It is our request that all the intermediaries make sincere efforts to adhere to the guidelines and the code of conduct so that all those engaged in the business of selling and marketing of mutual fund scheme’s follow professional, healthy and best practices for the sustained benefit of all concerned – investors, intermediaries and the Mutual Fund industry as a whole”

The request by AMFI has fallen into deaf ears of Standard Chartered Bank and they have committed such grave fraud so as to rob investors like us of our hard earned money.

Manoj Singh

1 year ago

As the licences were issued by the central bank,R.B.I./and the regulator /statutory body issuing certification for distributorship/intermediary,(ARN-1209)to the bank,above authorities must intervene.

Manoj Singh

1 year ago

How can S.C.B.get away with this kind of fraud?i.e.reckless churning/unauthorised transactions. Client interest not protected!Violating all guidelines/norms prescribed by SEBI/AMFI/R.B.I.?The authorities must take appropriate action,like it took in the celeb.Suchitra K.case vs.HSBC.

Dr.Abhik De

1 year ago

The regulator/the central bank must take action against the erraint stanChart bank,as did against the HSBC/July 2014 ,without any discrimination.Both issued the licences to the bank,for that matter ,all banks.It should make Dr De's case an example,that no bank acting as intermediary/distributor/investment advisor/wealth manager ,can get away after cheating customers.They should follow their guidelines/codes as formulated to protect the interest of investors.Clients'interest should have been of prime interest.

Dr.Abhik De

1 year ago

Atlast getting fed up,COMPLAINT WAS LODGED WITH CRIME BRANCH.After the complaint has been filed and during the course of the investigation the Bank had sent a letter dated November 24, 2014 wherein they stated – “The Bank has given due consideration and examined these issues(of 27.08.2011) and has decided to pay you a sum of Rs.35, 00,000/-- (Rupees Thirty Five Lacs) in full and final satisfaction of any or all of your claims, demands and contentions raised by you against the Bank ("Claims"). We have therefore credited your account no. 322-1-013831-2 on 24th November 2014 held with us at Bidhan Sarani Branch Kolkata with the said sum of Rs. Rs.35,00,000/- (Rupees Thirty Five Lacs).”. This decision to credit the amount was unilateral,without any details and attempt to wash the hands off by paying this meagre amount after cheating me to the tune of Crores.

28. The bank in the said letter also claimed – “This payment has been made by the Bank as a goodwill gesture and to maintain cordial relationship with you. The payment of this amount should not in any way be construed as admission of any fault or default or failure or offensive act on the part of the Bank or any of its officers”. These statements itself is an admission of guilt. Regulator/the central bank unmoved.I suppose out of "GOODWILL GESTURE TO STANCHART BANK".

Dr.Abhik De

1 year ago

There is clear Code of Conduct issued by Investment Management Department of Securities and Exchange Board of India (SEBI) which has advised that all intermediaries of mutual funds shall follow the code of conduct issued by SEBI very strictly and it has also been advised that no mutual fund shall deal with the intermediaries who do not follow this code of Conduct. The circulars had been issued in terms of Section 11 of Sub-Section 1 of SEBI Act 1992 ( Mutual Funds ) Regulations 77 of SEBI ( Mutual Funds ) Regulations 1996 which had been issued with the objective to protect the interest of the investors in Securities and to promote the development and to regulate the securities market.Violation of SEBI code MFD/CIR/06/210/202(SEBI show caused HSBC bank in MS.Suchitra’s case for violating it) and SEBI/IMD/CIR NO.8/174648/2009dt.27.08.2009,wherein churning/overtransaction/commission driven malpractices have been prohibited. I am writing this to R.B.I./SEBI since you are the Central bank of the state,SEBI is the market watchdog, the control and regulations come within your domain and one of the Banks which has taken necessary permission and license from your end has committed such cheating and forgery. Therefore I do expect that you will direct your concerned officers to initiate an appropriate enquiry and take necessary steps against the erring bank and Mutual Funds for acting in collusion.StanChart violated the provisions of Regulations 3 (a), (b), (c) and (d) and 4(1) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 and SEBI’s Circular No. MFD/CIR/06/210/2002 dated June 26, 2002 prescribed under Regulation 77 of the SEBI(Mutual Funds) Regulations, 1996 read with Clauses 1, 9 and 13 of the Code of Conduct of Intermediaries of Mutual Funds. And many more,not possible to known to me/domain of SEBI/R.B.I.If action can be taken against HSBC,why not against StanChart,I wonder!

Gold seized at Vizag airport reveals new tactic by gangs
The seizure of 63 kg gold at Visakhapatnam international airport has revealed a new strategy adopted by smuggling gangs to conceal the yellow metal in consumer electronic goods and landing at less frequented airports.
 
The Directorate of Revenue Intelligence (DRI) seized the gold valued at Rs.16.85 crore from 56 passengers arriving from Malaysia and Singapore in the early hours of Monday.
 
DRI officials said Chennai-based gangs were bringing the precious metal in different shapes resembling the parts of the electronic goods, such as magnets in amplifiers, stand of speakers, central pulley of washing machine, rods of stand/trolley and magnets in transformer.
 
This was done in a meticulous way to avoid detection by customs officials through regular X-ray scanning of the baggage.
 
Investigations by DRI revealed that these couriers used to depart from Chennai airport to Malaysia or Singapore and return to less frequented airports with gold concealed in electronic goods or consumer durables such as music system, amplifiers, mini washing machine, electric oven, induction stove and television.
 
It was also found that the gangs were using large number of non-frequent passengers as couriers.
 
On specific intelligence, Chennai zonal unit of DRI with the assistance of DRI units at Visakhapatnam, Hyderabad and Customs Commissionerate, Visakhapatnam launched a major operation which began on Sunday night and continued till late Monday evening.
 
The operation resulted in huge haul of 63 kg of smuggled gold from three international flights - Air Asia 83 and Malindo 251, both from Kuala Lumpur, Malaysia and Silk Air MI442 from Singapore.
 
The officials identified suspect passengers in the three flights which landed late Sunday night. Their baggage was segregated and scanned. 
 
"The suspect goods were categorized individually and detailed examination was done by breaking open the goods in the concealment area," said a statement by DRI.
 
The gold was brought in an illegal manner in violation of provisions of the Customs Act, 1962 and Baggage Rules, 1998. The officials were questioning 56 passengers.
 
"Necessary legal action under Customs Act, 1962 for offences committed in smuggling of gold has been contemplated and the further investigation is on," the statement said.
 
This is the biggest seizure of the yellow metal at Visakhapatnam airport and one of the biggest hauls in the country.
 
There has been a spurt in gold smuggling in recent years as the precious metal is being brought in illegally to avoid import duty.

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Karnataka moves SC against Jayalalithaa's acquittal
The Karnataka government on Tuesday moved the Supreme Court challenging the state high court's May 11 verdict acquitting Tamil Nadu Chief Minister J. Jayalalithaa and others in a disproportionate assets case.
 
The Karnataka government has urged the apex court to stay the acquittal of Jayalalithaa, her aide Sasikala and others.

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