Is it Possible for a Stock Broker to Steal Your Money
If you think that ponzi schemes by the likes of Bernie Madoff ended stock market scams for good, you are far from the truth. Moreover, Jordan Belfort, the ‘Wolf of Wall Street’ couldn’t set a good example of how ‘crime doesn’t pay’. Financial crimes occur even today, in a world that is supposed to be more financially secure now. Sometimes these continue unabated and often, undetected. Consequently, before you heed the advice of any investment experts or brokers, you should do a diligence check. This may seem completely out of your league, but certain signs can tell you how to detect that a savvy investment professional is trying to dupe you.
- Stock Market Frauds - An Instance
There are many examples of fraud in the stock market sphere. Perhaps, a case that really had eyes rolling was when the Federal Securities and Exchange Commission of the USA charged an investment advisory company in Massachusetts. This was the firm of Family Endowment Partners, and its owner Dana Weiss. Among other illegal activities, the main one for which the firm was prosecuted was advising customers to make investments without informing them that Weiss would keep more than half the profits. Furthermore, clients were urged to invest a sum of $40 million in stocks of companies in which Weiss had interests, and from where Weiss collected funds.
Possibly, a main pitfall of succumbing to a scam is when you open demat account online. If you open a trading and demat account with a reputed broker like Motilal Oswal, you can be assured of being safe. However, demat account fraud is quite frequent with some brokers who are on the lookout to con you. Clients are frequently given long forms to fill and booklets of contracts to sign. These have clauses written in such fine print, you may overlook them. Additionally, there is always a shifty relationship manager that keeps urging you to sign on the dotted line. This should let you know that there is something amiss and you must read the document thoroughly.
- Beware of Fraudulent Brokers
In the year 2010, SEBI (Securities and Exchange board of India) made it mandatory to record all calls that brokers made to clients, and guidelines for the execution of trading via a POA on the client’s behalf. New regulations have curbed misuse to an extent, but not completely. A broker can still transfer stocks and shares that are sold by you, to the stock exchange. Brokers can also apply for mutual funds, IPOs, share offers, etc, based on a client’s instructions. Several times, fraud stock brokers will conduct these activities on your ‘behalf’ stating that you have given them the authority to do so. Placing orders over the phone is a bad idea too, as there is no record of any instructions and calls may not be recorded.
Remember that a broker earns wealth every time you conduct a transaction. The goal of brokers may not be to make money for you, but for themselves first. Demat fraud should be checked on and you shouldn’t be unaware of what shares are transferred without your knowledge. Banking on a reliable broker like Motilal Oswal assures you of safety and your best interests.
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