Portfolio Management Services
WgCdr AK Singh
(Querist) 14 March 2011
This query is : Resolved
Dear all,
1.On 17 Aug 10, I was approached by the executives of YYY Financial Intermediaries Pvt Ltd, at my residence at NEW DELHI. They offered to manage my savings and promised growth at much higher rates than those achieved in bank fixed deposits. Further, I was also shown the details of accounts of their two existing clients, whose money had grown in excess of 25% in less than one year. In light of the above, they requested me to invest my spare money with YYY for better returns.
2.However, I sought promises of absolute protection of my initial invested capital and projection of minimum growth rate for the same. In response, protection of my initial deposit amount and its growth at the minimum rate of 20% per annum were promised.
3.Thus, I agreed to open three accounts with YYY― one each for Securities, Currencies and Commodities. However, before signing the papers for the same, I verbally specified the following conditions :
(a)That all the three accounts will be kept absolutely separate from one another. Accordingly, the said three accounts and ledgers will be maintained separately; and the respective transactions statements and balance of accounts will also be provided separately.
(b)That the respective sums deposited in the said three accounts will remain the absolute limits for trading from the said respective accounts; and the amount earmarked for any one account will not be utilised for trading from any of the other accounts.
(c)That any additional amount deposited later in my YYY account would be meant only for investment (against delivery), and the same will be utilised as per specific instructions from me. Hence, under any circumstances, the said additional amount will not be utilised by any of the Dealers for trading from any of my three YYY accounts.
(d)That before executing any trades from any of my accounts, my permission would be taken; after giving me the option to choose from the best three recommendations of the Research team of YYY.
(e)That at the end of each trading day, the respective dealers separately would provide me the account status in respect of all the three accounts, along with the details of trades executed and amounts debited and/or credited, including the final amount balance in each respective accounts.
(f)That my initial invested capital invested would be protected at all costs; and all known techniques like ‘Hedging’ etc would be employed towards the same. Further, a growth rate of at least 20% pa would be ensured for my invested capital.
4.The said executives of YYY Financial Intermediaries Pvt Ltd agreed and promised to abide by all of the above conditions. Thus, I signed the documents brought by them for opening the three accounts with YYY; and issued three separate account payee checks for the same as per following details :
(a)Securities A/C: Rs 1,00,000/= (CHQ dt 17 Aug 10).
(b)Currencies A/C: Rs 20,000/= (CHQ dt 17 Aug 10).
(c)Commodities A/C: Rs 20,000/= (CHQ dt 17 Aug 10).
5.Thus, a total amount of Rs 1,40,000/= was deposited with YYY in three separate accounts. Later, for purpose of investment in stocks against delivery, I deposited an additional amount of Rs 200,000/= in my YYY a/c vide a Delhi chq dated 26 Nov 10. Further, I informed the same to all the YYY Dealers operating my said three accounts, with specific instructions not to utilise the said additional amount under any circumstances; as it was meant only for investment by me.
6.Barring a few trades in the end-Oct 10, regular trading in my Securities ac began only by 15 Nov 10. However, almost all the conditions promised and agreed upon at the time of opening of my accounts were violated with impunity. Facts regarding the same are submitted below.
7.Firstly, a definite sum was earmarked for each of the three accounts, and the same were to be maintained in separate ledgers. Accordingly, separate cheques were also collected for the same. However, the amounts earmarked for Securities and Currencies accounts were merged and kept in one single ledger. My repeated requests to correct the anomaly had little effect.
8.Secondly, the transaction statements for the said Securities & Currencies accounts were also not given separately, but merged together. This arrangement made it very difficult to decipher the transactions and activities of one account from the other, as transactions of both accounts were presented interspersed with each other in a haphazard manner. Again, my repeated requests to correct the anomaly were not entertained.
9.Thirdly, the limits imposed for trading amounts as the sums earmarked for the said three accounts were not respected; and the same were violated with such frequency as if no such limits existed. Also, the additional amount of Rs 200,000/=, which was deposited separately to be used for investment only by me, was also utilized freely by all the Dealers for trading in the said three accounts. Once again, my repeated reminders to the respective Dealers did not succeed in changing the trend.
10.Fourthly, before executing any trades from any of my accounts, my permission was to be taken; after giving me the option to choose from the best three recommendations of the Research team of YYY. However, all the Dealers invariably executed the trades first and informed me later. Also, the offer of choosing from amongst the three best recommendations was never given. In several cases, the trades were not informed to me even after execution, and information about the same was received subsequently from the Trades Confirmation Dept of the YYY. In spite of my repeated reminders, the respective Dealers did not change their ways of operating in this regard.
11.That at the end of each trading day, the respective dealers separately would provide me the account status in respect of all the three accounts, along with the details of trades executed and amounts debited and/or credited, including the final amount balance in each respective accounts. None of this was ever done as promised.
12.That my initial invested capital invested would be protected at all costs; towards which, all known techniques like ‘Hedging’ etc would be employed. Further, a growth rate of at least 20% pa would be ensured for my invested capital. However, none of this was done as promised. Instead, out of the invested capital of Rs 1,20,000/= in my Stocks and Currencies accounts, a total loss of Rs 86,897.95 was incurred to me through casual and reckless trading carried out in from mid-Nov to mid-Dec 10. Thus, only an amount of Rs 32,102.05 was paid out to me after closing the said accounts on 04 Feb 11.
13.It is submitted that in mid-Dec 10, I realised that huge losses were being incurred to my Stocks account, through irresponsible and reckless trading from my Stocks account by the concerned Dealer, Mr abc. In addition, he had also not been taking my prior concurrence before entering into certain high value and risky transactions. Hence, from 22 Dec 10 onwards, I declined to confirm the trades carried out without my prior permission. Consequently, certain loss making positions were left open; while my said account was also frozen by the concerned Trades Confirmation Dept of YYY, which further increased the said losses.
14.On 27 Dec 10 at 1130 h, Mr xyz from YYY, along with Mr abc, met me and requested me to confirm the said trades which had been carried out from my account by Mr abc without my prior permission. He agreed that an error had been committed by Mr abc. However, he added that if I did not confirm the said trades and accept losses, the losses accrued would have to be borne by Mr abc, and that he would also lose his job at YYY. However, However, I refused to accept losses on behalf of Mr abc. Then Mr xyz assured me that he would completely recover my entire losses incurred in the Stocks/Securities account within one month (i.e., by end-Jan 11). He also promised me that from thereon, he would personally handle my Stocks and Commodities accounts, and Mr abc would not be permitted to operate my Stocks/Securities account.
15.In addition, Mr xyz also made the following promises :
(a)That he would ensure that my consent is taken before execution of any trades from my a/c; and that I would be regularly informed about the YYY's Research Team's recommendations for trades.
(b)That he would provide me the status of my a/c (net/final amount balance) on each trading day.
16.Based on the promise of recovery of my losses by Mr xyz on 27 Dec 10, I agreed to confirm the trades carried out by Mr abc from 22 Dec 10 onwards. I reposed faith in Mr xyz with the hope and belief that he would fulfill the promises he made to me. However, he failed to deliver on any of his promises made to me on 27 Dec 10. Thus, the losses incurred in my Stocks/Securities account were not recovered, and I was forced to close my accounts with YYY. Finally, out of the initial invested capital of Rs 1,20,000/= in my Stocks & Currencies accounts, only an amount of Rs 32,102.05 was paid out to me after closing the said accounts on 04 Feb 11. Thus, I had to bear a total loss of Rs 86,897.95, which was in breach of the promise made to me by Mr xyz on 27 Dec 10.
17.Further, Mr abc repeatedly utilised more funds than allocated for my Stocks/Securities account, which he was authorised to operate on my behalf. In addition, several trades done carried out by him appeared to be against the obvious market trend; and hence were perhaps meant to favour certain other persons/clients. This aspect needs to be investigated.
18.In light of the above, therefore, it may kindly be clarified if a case is made out against the following :
(a)Mr xyz of YYY Financial Intermediaries Pvt Ltd, for criminal conspiracy and cheating; where in, he willfully made false promise with intention to cheat and to dishonestly persuaded me to confirm the unauthorised trades carried out from my Stocks/ Securities account by Mr abc, and thus accept losses for the same.
(b)Mr abc of YYY Financial Intermediaries Pvt Ltd, for carrying out several unauthorised, reckless and apparently dishonest trades from Stocks/Securities a/c, many of them against the obvious market trend; for repeatedly utilising more funds than allocated for trading in the account he was authorised to operate; and for failing to preserve the initial invested capital through employment of various safety measures like ‘Hedging’ etc, and thus dissolving almost the entire allocated capital in huge losses.
(c)YYY Financial Intermediaries Pvt Ltd, for allowing unauthorised, reckless and apparently dishonest trades; allowing cross utilisation of funds from all my three accounts held with them; failing to protect my capital and fulfill the promises made to me by their representatives; for willfully delaying closure of my Commodities account and refund of the amount held in the same (in spite of repeated requests); and for repeatedly refusing to provide separate statements of all the trades carried out from the said three accounts in transparent manner with intent to confuse and prevent proper understanding of the said transactions by the undersigned.
21.Accordingly, it may also be clarified whether an FIR may be lodged and suitable cases may be registered against the said persons/entities in the subject matter; or if the subject case needs to be taken up at some other level/forum. Further, the procedure in each alternative may kindly be specified.
Thanking You, With Regards.
AK Singh
DEFENSE ADVOCATE.-firmaction@g
(Expert) 14 March 2011
Very long message for short story.
1) complain to SEBI.
2) compliant to NSE OR BSE where your transactions are done.
3) File police complaint and follow up with police to take action.
4) Hire good advocate and also file private criminal complaints of cheating against all the directors.
5) there may be others also having similar story , try also to do some joint action.
WgCdr AK Singh
(Querist) 14 March 2011
Dear Sir,
1. Thanks for your patience and prompt response.
2. Kindly clarify if online complaints to SEBI/BSE/NSE are entertained.
3. Kindly advise any good advocates in my area (India Gate, New Delhi).
Thanks a ton.
AK Singh
Unbiased Advice
(Expert) 14 March 2011
http://www.sebi.gov.in/Index.jsp?contentDisp=Department&dep_id=13
