investor is consumer under cp act

Dear Mr.Sadananda Netha Gone,

The definitions of ‘Complainant’, ‘Complaint’, ‘Consumer’, ‘Consumer Dispute’ and ‘Service’, as defined in Section 2 (1) of the Consumer Protection Act, 1986 (As Amended) do not cover the claims arising under the present dispute and that from the aforesaid definitions, the Complainant is not a ‘Consumer’ as the Act defines - 

                        “Consumer to be a person who buys any goods for  consideration which has been paid and promised or partly paid and partly promised or under any system of deferred payment and includes any user of such goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised, or under any system of deferred payment when such use is made with the approval of such person, but does not include a person who obtains such goods for resale or for any commercial purpose;

 Secondly the Act further lays  down that person who obtains any goods for resale or avails of any services for any commercial purpose is held not to be a Consumer and is barred to get remedy under the Consumer Protection Act. Further the Explanation of Section 2(d) of Consumer Protection Act also lays down that “commercial purpose” does not include use by a person of goods bought and used by him and services availed by him exclusively for the purposes of earning his livelihood by means of self employment.

This preposition is clarified in view of the judgement in the matter of The National Consumer Disputes Redressal Commission where in it was held  in Unit Trust of India versus Sabitri Devi Agarwal [II (2000) CPJ (NC)] that “The Consumer Protection Act is not for entertaining or compensating speculative transactions or losses”.

In addition to the above usually the trading in shares is carried by the help of intermediatory/ies known as Depository Participant according to the SEBI Rules and guidelines which ipso facto provides for the adjudication of dispute by Arbitral Tribunal.

In light of above the answer to your query is negative.

Best Regards

Daksh

dear member

Role of the Broker is only to buy share ordered by you, he is only a middleman between Exchanges and the investors   As most of the investors are unaware of operation of the Stock markets  They trust their brokers for not only executing the contract but also  for their opinion and advise and invest in the company advised by them without even checking  the records of the company  to make quick bucks

Broker and sub broker are are governed by SEBI

And all the agreements between the investor and brokers are in place and all the norms are looked into as eveything is Online

 Trading  on behalf of the client on the basis of Telephonic instructions received is also mentioned in the agreement  

Payments and receipts are governed by the Sebi norms which is the third day i.e (T+2 DAYS ) in case of any delay in remitting the payment  agreement to hold the funds is also executed

Most of the time investors appoint their brokers as their Attorney to operate  Demat account

 Intimation of the trade is given Online though it is manadatory to give physical copy  there is another agreement to this

Agreement to conduct trade on behalf of the investor/trader is also executed .

so what ever are the loopholes they are covered by onesided agreement between the Broker and the investors

in case of lossess you have no remedy becasue they only advise and to invest and not to invest is your decision .

can't think of any reason where I can approach NCDRC for Deficiency of service / delay in payments /losses in stock markets / illegally withholding stocks in the pool account  after receipt of payments.

It is only procedural irregularities for which SEBI is right place to approach for any complaints

I agree with teh advice given by Daksh.

An individual retail investor who buys or sells securities in the stock exchange through a stock broker is a consumer and is entitled to protection under consumer protection Act.  Please go through the the judgements of NCDRC   Please go through the recent  judgement in FA 543 of 2011 and two judgements of National coimmission in Revision petition 1479 of 2005 and First appeal 1437 of 1994. SEBI publication also says that investors can always approach consumer courts and Civil courts against stock brokers for deficiency in service.

investors are availing a financial service and the CPA covers and includes all services and every service provider is not named therein.  It is not correct to say that the service is availed by the investor for commercial purpose.  If it is for commercial purpose no government servnats including judicial officers and their close relatives can purchase or sell shares and securities and the secondary market .

Only two servies are exempt. one is gratutitory service.  Here the stock broker renders the service for consideration namely brokerage.

The other exception when the servoice is a personal contract of service which implies the relationship of master and servant or employer employee relationship.

Contract of personal service will generally refer to the relationship of master and servant or a  teacher giving private tuitions and student where there is no prescribed standard or quality of service provided under law. TPl go through  the judgement of the Honourable Supreme Court of India in Indian Medical Association, Appellant versus V.P.Shanta and others , Respondents- ( Lex Id 251292=  1996AIR550.) In this landmark judgement the Apex Court has given detailed findings on “ Consumer, “Deficiency ,“ “service, ” and personal contract of service as distinguished from personal contract for services.  The court has said in some cases even free services will come within the purview of consumer protection Act.  In the present case the stock brokers render service for consideration, namely, brokerage and both under Law as well as the member Client Agreement they have to comply with all the legal requirements meant to protect the interest of investors, who represent a class of consumers.  Any single violation of the rules is enough to create a presumption of Fraud as stated in regulation 2(1)© of (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Markets) Regulations,2003 (hereinafter referred to as “PFUTP”) which reads Quote 2 (1)(c) "fraud" includes any act, expression, omission or concealment

committed whether in a deceitful manner or not by a person or by any

other person with his connivance or by his agent to deal in securities,

whether or not there is any wrongful gain or avoidance of any loss, …

…”

8.The brokers are not only agents of the customers but they are also fiduciaries and Trustees as they hold the monies and shares of the clients and the tile to such monies and shares vest with the clients, though the possession remains with the brokers. A stock broker who does not follow the mandatory rules has no right to debit the client’s account or transfer monies from one account to another without the written consent and authority of the client. Even a Banker cannot transfer funds from one account to another without a written authority duly signed by the client. There can be no cheque, bill of exchange or promissory note without signature of the drawer. In the same way there cannot be a valid contract/ contract note without signature of the stock broker.   

The service is availed by the investor for his personal benefit and use and not for selling the service to others.  The stock broker while rendering the service has to follow all the rules and laws and if he does not he is not entitled to debit the account of the client and also not entitled to brokerage.  A stock broker is an agent and trustee of the client's funds and securities and is bound to account for the funds and securities when called upon to do so.Hon. SC in the matter of SEBI Versus Shri Ram mutual Fund (2006) 68 SCL 216 (SC) inter alia, held Quote  once the violation of statutory regulations is established imposition of penalty becomes sine qua non of violation and the intention of the parties committing such violation becomes totally irrelevant. once the contravention os established the penalty is to follow"

It is unfortunate that Securities Law is not not effectively enforced in the interests of investors by the Regulators in view of a strong Satock brokers lobby and uncrupulous promoters who appear to control the enforcement machinery though SEBI ACT provides for penalties upto and some times minimum penalty of 25 crores. 

The Dodd-Frank and Consumer Protection Act  which has been passed  in 2010 has devoted 200 pages only for consumer Protection and the same manner The Financial Services authority in United Kingdom has initiated a number of steps for protecting the interest of investors availing financial services from Intermediaries.In the USA they have also formed a Bereau for consumer Protection.

It is high time the investors unite to asset their rights and remove the notion that they cannot approach the consumer courts which has been spread by vested interests as the only court which can wawrd spedy remedy and damages is Consumer courts under CPA

M.Sundararaman