A retired non-resident Indian (NRI) has allegedly lost Rs 5.67 lakh when representatives of Kotak Securities dabbled in futures and options (F&O) with his money without his knowledge. In this regard, the National Consumer Disputes Redressal Commission (NCDRC) has ordered Kotak Securities to refund the entire amount of money lost by them due to F&O trading, i.e., Rs 5,67,375 along with Rs 5,000 as compensation and Rs 1,000 as litigation expenses.
According to the NRI complainant’s testimony before the district consumer forum, he was an individual, who after giving up his job abroad, was lured by the advertisement made by Kotak Securities and hence invested. “Attracted by the advertisements made by Kotak Securities, the investment for trading in shares in September 2007 was made. The two executives deputed by Kotak Securities promised that they will trade in the account only after getting confirmation for each transaction,” said the NRI individual.
Lawyers say that generally, a stockbroker is not liable for the losses caused to an individual while trading in the stock market. “The inherent risk of investing lies with the individual and not the stockbroker. However, a broker can be held liable if the individual can prove that the stock market trading loss has resulted directly due to the broker’s negligence, misconduct, or failure to fulfil their obligations,” says Rishi Segal, Advocate on Record, Supreme Court of India.
Kotak Securities contested that they are a member of the National Stock Exchange (NSE) and is acting as share broker and it is not their fault that money was lost trading in F&O(s). “The Complainant is not consumer as defined under section 2(1)(d) as the trades were executed with a speculative motive to earn profit. It is true that he had invested Rs 10,00,750/- with Kotak Securities but the loss is the trading loss for which we are not responsible,” said Kotak Securities.
According to Kotak Securities, “The Complainant concealed the fact that he received pay-in of funds from the statement of accounts claiming the disputed period. The copies of contract notes, bills, trade confirmation statement of account were forwarded to the Complainant in his email. The Complainant did not raise any objection against the trades executed in his account. After execution he had taken a pay out of Rs 58,496.54 as revealed by the ledger A/c dated 01.02.2008.”
According to the complainant who is a retired NRI, Kotak Securities very well knew that for trading in the derivative segment of the stock market margin money has to be deposited. For this specific purpose (margin money), a separate bank account in the name of the complainant was opened and the demat account was linked to it.
On November 15, 2007, Kotak Securities representatives contacted the retired NRI and asked for approval in a trade, which he refused to give and asked the company to forward the trade ledger file. “They did not forward the same. The company has done derivative trade in the account without the written authority and without any kind of instruction,” alleged the complainant in the consumer forum.
Mar 07,2024
Source: Economic Time