Fake Sub-Brokers Make Merry As Bourses Zoom

The recent boom at the has brought along its share of scams. A number of fake sub-brokers have suddenly sprouted, taking advantage of the lack of awareness among investors.

The fake sub-brokers usually take the names of some well-known brokers registered with the Calcutta Stock Exchange (CSE) and operate in the suburbs from where it is difficult for investors to make trips to the broker on a regular basis.

This is so much so that CSE brokers are scared that the fake sub-broker racket will drag them down.

"I have been a victim of a similar case where an investor trusted a fake sub-broker who took our firm's name and claimed to be our sub-broker," said Bimal Kumar Ghosh, a CSE broker. "The investors are still not aware of the rules to be followed," he observed

 

The Securities and Exchange Board of India's (Sebi) sub-broker norms are clear that only registered sub-brokers can do business. However, a lack of awareness on the part of the investors, particularly in the suburbs, has meant these fakes can get away scot-free. In some cases, these fakes have posed as sub-brokers and got away with shares worth lakhs of rupees. Later, the brokers are the ones who face the flak from investors since the duplicates are no where to be found.

In demat trade too, some brokers say, since there is no physical proof of the ownership of the shares (like the signature at the back of the share certificate), it becomes difficult for the broker to trace the actual owner of the shares if a middleman seeks to sell it through the broker. However, CSE executive director Tapas Datta says there are checks in the demat system as well. "There is an investor beneficiary account and a broker pool account. Why should an investor transfer the shares to the middleman's account? It reflects a lack of awareness and is also downright cheating on the part of these fakes."

But, with the index heading northwards, small investors in the suburbs are again seeking to make money, and are falling prey to these fakes. Brokers say, despite the Sebi's "know your client" norms, it becomes very difficult for brokers to know whether a client is actually selling his own shares or someone else's in a demat regime. Brokers say investors should demand to know the sub-broker's identity and verify his Sebi registration before dealing with him. "Know your client schemes are all very well, but there should also be a `know your broker' rule so that investors are not victims of such scams," brokers said.