Market experts say that investors do not seem to be aware that they should be very careful while dealing with intermediaries in the financial markets. Over the last six months three episodes in which investors were taken for a ride came to light.

The first related to the Rs 100 crore loss that Aditya Birla Money's HNI clients booked due to the Options Maxima Strategy that the brokerage aggressively promoted.

This was followed by the Rs 400-crore Citibank fraud case where investors including HNIs and corporations lost heavily to a glib talking relationship manager.

The latest in the series is the case of a now deceased sub-broker of ICICI Securities, Rajeev Bansal, who is reported to have duped investors of several crore rupees by misusing the power of attorney facility to divert funds into another account. Many investors claim that they transferred funds into Bansal's and his wife's bank accounts directly and thus, it became easy for them to misappropriate the funds.

SEBI is yet to reply to a Business Line query regarding the course of action it is taking in these three cases.

No time

Experts say that investors, especially HNIs, do not devote adequate time when they interact with intermediaries such as a broker, PMS provider and the like. They point out that basic due diligence, if done properly, could prevent a lot of heartburn.

“If an investor takes the extra effort of creating a login with his depository NSDL or CDSL and activates the SMS facility on his demat account to receive transaction alerts, half the problem is solved,” said Mr Anshu Kapoor, Head –Private Wealth Division, Edelweiss Wealth Advisory & Investment Services.

“This would help an investor to monitor his portfolio activity as and when he requires,” he added.

Experts said that investors commit the cardinal sin of not keeping photocopies of documents that they have signed and given to their broker. “There are many clients who sign blank forms and very rarely ask for transaction confirmations and account statements,” said the CEO of a mutual fund. “This is a sure shot recipe for disaster,” he added.

“Clients should always place their buy and sell orders only through telephone lines that are recorded and exercise caution while giving power of attorney to any individual,” said Mr Kapoor.

Risk profile – a must

Experts said that investors should never try their hand at products that they do not understand or those that do not suit their risk profile. Hence, it is important to get a risk profile done before choosing any product. They should also ensure that regular portfolio reviews are done, that statements are provided to them at their correspondence address and that they know whom to contact in case they have grievances.

It is not advisable to sign blank cheques, give blank instructions, accept manually generated reports and disclose account information to all and sundry other than the designated person of the brokerage or advisory company.

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