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Chennai-based B. Subramaniam, a 62-year-old investor has to keep worrying about his broking account. He entered the markets as a long-term investor and bought certain key stocks at the outset. However, his broker keeps telling him to execute at least one trade a year to keep his account activated.
“I am very irritated about the fact that I have to keep track of the one-year deadline. I am not into trading and I prefer to hold stocks for a period of time. To comply with regulations, I have to reactivate my account every year or make some trades for the sake of it,” said Subramaniam.
Many retail investors — mostly senior citizens — are expressing discomfort because they are tired of keeping pace with the deactivation guidelines. Reactivation would involve them to resubmit documents and other KYC requirements.
Regulation
According to a regulation by the SEBI, a client’s account is considered dormant if he does not trade at least once in any of the segments (i.e. NSE Cash, NSE F&O and BSE Cash) during a period of 365 days.
“This regulation is put in place to prevent misuse of dormant investor accounts. We have a one-year check on this as well as an internal six-month check on dormant accounts. Reactivation of an account can be done in less than a day,” said B. Gopkumar, Head of Broking, Kotak Securities. About 10-15 per cent of their client accounts are dormant.
Although the regulation put forward by SEBI is aimed towards the safety of investors, broking firms are constantly getting client complaints.
‘Nuisance’
“Many of our clients feel this reactivation formality is a nuisance. When the markets are dull we hardly see any reactivation but during a rally the situation is very different. On an average, we receive 700-800 requests for account reactivation every month. But, during a rally — the reactivation is about 50 per cent higher,” said V. Krishnan, President, Integrated Enterprises. One-third of their 75,000 retail investor accounts are dormant.
However, according to a SEBI source, the rule became ‘infructuous’ after the mandatory mobile confirmation to investors for each trade.
SEBI should come out with necessary guidelines so that genuine investors are not subjected to any grievances, said a senior market watcher.
Most retail investors fear the reactivation process because they may miss an opportunity to buy a stock at that price. “As prices keep moving, clients get irritated when we tell them that they cannot buy/sell the stock because of the deactivation issue. That is one practical difficulty that we face,” said Krishnan.
Every brokerage has its own rules for reactivation. Centrum Broking’s reactivation rules are — once a client is classified as dormant and deactivated in the trading system, the trades will be allowed in that account only after receipt of specific request from the branch manager/ relationship manager and duly approved by Head of Business group to the RMS group.
RMS group will ensure that such request is received only from the person who is authorised to make such request, i.e., the concerned branch manager/ regional manager or business head.
priya.s@thehindu.co.in
badrinarayanan.ks@thehindu.co.in
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