Can a broker sell your shares without your knowledge?
KS BADRI NARAYANAN BUSINESS LINE
8K Miles Software promoter files complaint with SEBI on illegal selling
CHENNAI, OCTOBER 19
Recently, 8K Miles Software Services, the cloud computing firm, had filed a criminal complaint with the police and SEBI against Quantum Global Securities and Kumar Share Brokers for ‘illegally’ selling 8.42 per cent of the shares belonging to its promoter and Chairman Suresh Venkatachari.
In the complaint filed on September 17, which was disclosed to the exchanges on October 12, it said that Quantum Global Securities and Kumar Share Brokers had wrongfully and illegally transferred nearly 25.7 lakh shares through off-market transactions on various dates to various parties, without his knowledge or consent. So, is it possible to sell off shares without the owner’s knowledge?
There are various checks and balances right now, thanks to market regulator SEBI. All brokerages are required to send e-mail and SMS alerts to their clients immediately after they transact on their behalf. Some even insist on acknowledgements on their alerts from the client so that they are aware of the transactions.
Alerts from depositories
If you are transacting through the stock exchange platform, you will get an SMS and e-mails alert from the exchanges within 24 hours, if not immediately. Even depositories – NSDL and CDSL – where your shares are held in electronic form – send SMS/email alerts on the transactions, which intimate the number of shares sold (or bought) by you and the price at which you sold as well as the cumulative holdings after the transaction and the total transaction value.
Besides, you also get a periodical (mostly quarterly) statements from the depositories. “If any discrepancy is observed by the stock exchanges in the details uploaded by the stock brokers, including non-confirmation by investors, bounced e-mails, undelivered SMS/letters, etc, the stock exchanges should inform the same to respective stock broker,” according to SEBI.
Even if you have authorised someone to deal on your behalf, subscription to SMS alerts for the depository accounts operated through power of attorney is mandatory except in case of accounts held by non-individual, foreign individuals, and NRIs, says the SEBI rule.
In case of pledged shares, disclosure to the exchanges should be made within seven working days from the creation or invocation or release of encumbrance to the stock exchanges and to the target company at its registered office.
In the case of off-market transactions, promoters, employees and directors of a firm have to disclose within two trading days to the exchanges and SEBI, if the value of shares acquired or disposed of aggregates to over ₹10 lakh during a quarter.
Through all these steps, SEBI ensures that any dealings on your stock holdings are transparent and almost foolproof. However, if there is any gap that SEBI finds in the 8K Miles fiasco, it can further fine-tune the disclosure and transaction procedures to ensure the safety of investors.