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Non-receipt of funds and securities is the biggest issue plaguing investors in the stock market. Out of 8,289 investor complaints received by stock exchanges so far in FY15, 3,572, or 43 per cent, were on failure to receive shares or funds after trading.
According to investor associations, the non-receipt of funds and securities has become a serious concern among investors. There is a sudden rise in the market followed due to an increase in trading activity in the market.
According to the data provided by the exchanges, the number of complaints of this nature has more than doubled from 1,372. There has been a 22 per cent increase in total complaints in the current financial year. The total number of complaints filed with exchanges by investors in FY15 is 8,289, up from 6,147 in the last financial year.
According to market players, over-leveraged positions taken by brokerages or clients could cause delivery failure or non-receipt of funds. Often, brokers take loans against securities which are funded through the depository accounts of the clients. Banks don't release securities on time to the low liquidity at the brokerages, which leads to a default in payment of funds and securities by the broker to his client.
"This has become a major problem in the industry. The tight liquidity situation of the brokerages means that they are over-leveraged which hurts the clients. While most of these are resolved, it still leaves the investor high and dry," said Hinesh Doshi, vice-president, Investor Grievances Forum.
A small percentage of these complaints are also due to procedural and administrative lapses, Doshi added.
"This goes to show the broker is not doing his business properly. Today, with all three accounts - demat, trading, and bank accounts - linked, if the broker is following procedures correctly, then the funds and securities should reach clients," said a senior official of a domestic broking firm.
Some analysts believe the fault in some part also lay with the investors who did not keep adequate margins with their brokers.
Last week, the National Stock Exchange had also pointed out to such lapses in settlement by broker members in a circular on its website. It said that the brokers were guilty of not settling client accounts regularly.
"...it is observed during exchange-conducted inspections and the half-yearly internal audits conducted by member-appointed internal auditors that some members are not diligently adhering to the requirement of settling client accounts once a month or quarter as per the consent of client. It is also observed that the funds available with the member was reported to be short of the amount payable to the clients as per the settlement cycle, which indicates serious liquidity concerns," said the NSE circular.
The exchange circular also said the incidence of such complaints against some brokers received by the exchange had gone up in the recent past.
