Clients need to give written consent to get SMS tips

| Updated on: Apr 28, 2011

And declare they are aware of risks in equity trading

Broking houses have now started obtaining written consents from their clients who wish to receive SMS alerts on stock recommendations.

A customer of broking house IFCI Financial Services said that he intended to sign a consent letter to receive such alerts.

SEBI had cautioned investors on March 18, 2011, to take adequate care and carry out necessary due diligence before acting on advice provided by market intermediaries through SMSes, electronic or print media.

A client is expected to provide a signed undertaking that he is willing to receive stock recommendations through SMS at his risk and responsibility.

The client undertakes further that the SMS received would be used only by him and that he would not forward the SMS.

Clients are also expected to state that they are aware of the risks associated with equity trading.

“Many clients activate the ‘do not disturb' facility with their mobile service providers in order to block spam messages,” said Mr Mansingh Deshmukh, Head-Equity, JHP Securities. “Brokerages need this consent letter from the client in case they have to send a SMS to a client who has enabled the do not disturb facility or else their SMS would bounce.”

There is another school of thought among the broking community that does not subscribe to the idea of SMS alerts. “We do not send bulk SMSes as our advice is tailored to individual requirements,” said Mr Anshu Kapoor, Head –Private Wealth, Edelweiss Wealth Advisory and Investment Services.

Though this is a phenomenon predominantly prevalent in retail broking, the idea also seems to have caught up with the fund manager community. “Very few fund managers have the patience to go through a fundamental research report which is usually more than 10 pages long,” said the head of research at an Indian brokerage.

“Increasingly mutual fund and insurance fund managers are showing interest in receiving stock tips (on SMS) that consists of a technical call of a three-to-four-day horizon for short-term trading,” he said.

Published on April 28, 2011

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