NSE de­clares Am­ra­pali Aadya a de­faulter

SEBI should ask bourses, clear­ing houses to han­dle client money to check mis­use, say ex­perts

The Hindu Business Line - - MARKET WATCH - PALAK SHAH

While SEBI pon­ders over the idea of not al­low­ing stock bro­kers to han­dle client money, the list of de­fault­ers is pil­ing up. Am­ra­pali Aadya Trad­ing and In­vest­ment, yet an­other Delhi-based bro­ker, was de­clared a de­faulter by the NSE on Wed­nes­day. The bro­ker could be fac­ing de­fault claims of around ₹200 crore, a source said.

Am­ra­pali is the third in the list of Delhi-based stock bro­kers after Kassa Fin­vest and Uni­con, who have been ex­pelled from the mar­kets in over a year. Oth­ers in­clud­ing Vas­anti Se­cu­ri­ties, Royal In­ter­na­tional and Click­2­trade are un­der the scan­ner, the source said. This apart, a cou­ple of bro­kers from Mum­bai too owe huge amounts of money to stock ex­changes.

Lur­ing clients

In most cases, bro­kers are said to have lured clients by promis­ing them fixed re­turn and then dab­bled in the de­riv­a­tive seg­ment and even di­verted money for other pur­poses.

Ex­perts say that stock ex­changes have no mech­a­nism to stop bro­kers from mis­us­ing clients’ money and even the process of pay­ment of client money after re­cov­ery from bro­kers is not time­bound. Once a bro­ker is de­clared a de­faulter, ex­changes have to set­tle client claims by dig­ging into the in­vestor pro­tec­tion fund. But there is a de­bate on whether de­pos­i­to­ries too should be made to bear the cost.

SEBI had re­ceived more than 4,000 com­plaints against Kassa. A probe re­vealed Kassa used client mar­gin money to fund its as­so­ciate com­pa­nies in­clud­ing Sinia Global (reg­is­tered in Sin­ga­pore), Mys­tic Cures (a spa in Mehrauli) and Mi­das Global Fund (a mu­tual fund reg­is­tered in Sin­ga­pore).

SEBI’s Se­condary Mar­ket Ad­vi­sory Com­mit­tee, which met last month, had dis­cussed ways for direct pay­out of funds and se­cu­ri­ties in a client ac­count and limit the role of stock­bro­kers to trade ex­e­cu­tion only. Cur­rently, a client is­sues a cheque in the name of the bro­ker, via whom the for­mer places buy or­ders for shares. Sim­i­larly, it is the bro­ker who makes the pay­out to the client when shares are sold. Bro­kers also col­lect huge amounts in mar­gin money from clients for de­riv­a­tive trad­ing, which is where some of them get an op­por­tu­nity to siphon off money.

There is a view that ei­ther a cus­to­dian-like struc­ture should be brought in to han­dle client money or SEBI should ask stock ex­changes and clear­ing houses to di­rectly han­dle pay­out of funds and se­cu­ri­ties into client ac­counts.

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