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.
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.
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.
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.
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.
• 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.
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".