Moneylife Foundation Submits Investor Perspective on 32 Broker Defaults at NSE before SEBI Committee
Moneylife Digital Team 13 May 2022
The Securities and Exchange Board of India (SEBI) had invited Sucheta Dalal, founder-trustee of Moneylife Foundation, to make a presentation for an ad-hoc committee headed by G Mahalingam, a former whole-time member (WTM) of SEBI. She was asked to put together and present an investor perspective on several issues. 
 
Requesting adequate weightage and empathy for the major handicaps that stock market investors face, Sucheta Dalal on behalf of Moneylife Foundation, urged the regulator to hold exchanges accountable for their lapses, especially in cases of broker defaults. The committee will review and make recommendations for further strengthening governance norms at market infrastructure institutions (MIIs).  
 
In her presentation, Sucheta Dalal pointed out that investors alone cannot carry the burden for the failure of oversight of exchanges leading to broker defaults. She pointed out that the National Stock Exchange (NSE) has failed in various primary regulatory functions and sided with brokers, who whipped up frothy turnover by hook or by crook.
 
Since May 2019, there have been 32 broker defaults (including Modex International Securities, Anugrah Stock and Broking Pvt Ltd, Karvy Stock Broking, BMA Wealth Creators, Fairwealth Securities) on NSE. 
 
NSE expelled four brokers in 2019, 14 in 2020, 10 in 2021 and four in the first four months of 2022, that had taken the total number of brokers defaulted and expelled by NSE to 32.
 
In the presentation, Moneylife Foundation has given 11 suggestions that would help redress investors' grievances, especially in broker defaults. 
 
Ms Dalal also highlighted issues with the arbitration orders passed by grievance redress committees (GRCs). She says, "...arbitration cases and orders of the GRC have chilling examples of how SEBI rules are flouted with impunity by brokerage firms. Investors are rarely able to put up a proper fight, so the number of orders does not tell the real story. Also, the outcome is barely adequate. An investor is lucky to avoid losses - there is no compensation, costs or damages."
 
Comments
adityag
3 months ago
I expect SEBI to do Nit (with a capital N). Zilch (with a capital Z). But I hope I'm wrong.
rmganatra
3 months ago
This is a stunning account. I expect SEBI to make major regulatory changes and disposal of the matter would be fast.

It is necessary that unauthorised trading is classified as criminal act and SEBI should be empowered as a special court under CrPC to pronounce verdict on such criminal acts speedily.
rmganatra
3 months ago
This is a stunning account. I expect SEBI to make major regulatory changes and disposal of the matter would be fast.

It is necessary that unauthorised trading is classified as criminal act and SEBI should be empowered as a special court under CrPC to pronounce verdict on such criminal acts speedily.
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