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Is RKSV Securities the next broker to go bankrupt?
RKSV/Upstox had raised capital from Kalaari Capital in May 2016 however come March 31 2017 most of this capital had eroded and the net worth of RKSV was down to only 14 crores from 24.58 Crores in the earlier year. These facts can be verified from the MCA i.e. the Ministry of Corporate Affairs website. RKSV incurred a loss of Rs. 44766455 crores in FY16 and a loss of 95946324 crores in FY17 and had a burn rate of 80 Lakhs - 1 Crore a month which would lead to complete depletion of capital in the current financial year. In such a financial position, the clients funds and securities maintained with a broker like RKSV are at substantial risk. Of late, there have been quite a few instances of broker default coming to light. In the last two months alone, the BSE and the NSE have suspended few brokers — F6 Finserv, Wealth Mantra, Ficus Securities and CRP Capital Services, amidst allegations of misuse of clients’ money to speculate in the market. In 2017, over half-a-dozen brokers had turned defaulters. Also, Kalaari capital, the only institutional investor in RKSV is looking to sell its stake in Upstox at a huge haircut similar to their desire to exit Snapdeal. Unlike the typical e-commerce businesses which can burn money, stock broking businesses are akin to banks and should have adequate capital requirements. Investors should avoid a mishap like F6, Ficus, etc from happening with RKSV and ensure safety of their funds and securities.
In case of default, what should investors do? The first step is escalate the issue to the investor service cell of the exchanges. If the issue is not resolved within 15 days, bourses themselves will refer the case to Investors’ Grievances Redressal Committee (IGRC). If not satisfied even at IGRC, investors are free to insist on arbitration process.
The first step is to file a written complaint (through arbitration application form, which involves deposit of money) to stock exchanges as early as possible.
However, in case the broker is either expelled or declared defaulter by the exchanges, the door for arbitration is closed. In that case, the exchanges will issue a public advertisement inviting public claims. So, investors have to be vigilant and keep track of the exchanges’ activities.
The Defaulters’ Committee in the exchanges distributes the amount available in the defaulter’s account to the admitted claimants on pro rata basis. In case the funds in the defaulter’s account are insufficient to meet the admitted value of claims, compensation is paid from the Investor Protection Fund, based on the recommendations of the defaulters’ committee, up to a maximum of ₹25 lakh (says NSE) and ₹15 lakh (BSE).
The guidelines are available on the websites of the BSE and the NSE.
Is RKSV Securities the next broker to go bankrupt?
RKSV/Upstox had raised capital from Kalaari Capital in May 2016 however come March 31 2017 most of this capital had eroded and the net worth of RKSV was down to only 14 crores from 24.58 Crores in the earlier year. These facts can be verified from the MCA i.e. the Ministry of Corporate Affairs website. RKSV incurred a loss of Rs. 44766455 crores in FY16 and a loss of 95946324 crores in FY17 and had a burn rate of 80 Lakhs - 1 Crore a month which would lead to complete depletion of capital in the current financial year. In such a financial position, the clients funds and securities maintained with a broker like RKSV are at substantial risk. Of late, there have been quite a few instances of broker default coming to light. In the last two months alone, the BSE and the NSE have suspended few brokers — F6 Finserv, Wealth Mantra, Ficus Securities and CRP Capital Services, amidst allegations of misuse of clients’ money to speculate in the market. In 2017, over half-a-dozen brokers had turned defaulters. Also, Kalaari capital, the only institutional investor in RKSV is looking to sell its stake in Upstox at a huge haircut similar to their desire to exit Snapdeal. Unlike the typical e-commerce businesses which can burn money, stock broking businesses are akin to banks and should have adequate capital requirements. Investors should avoid a mishap like F6, Ficus, etc from happening with RKSV and ensure safety of their funds and securities.
In case of default, what should investors do? The first step is escalate the issue to the investor service cell of the exchanges. If the issue is not resolved within 15 days, bourses themselves will refer the case to Investors’ Grievances Redressal Committee (IGRC). If not satisfied even at IGRC, investors are free to insist on arbitration process.
The first step is to file a written complaint (through arbitration application form, which involves deposit of money) to stock exchanges as early as possible.
However, in case the broker is either expelled or declared defaulter by the exchanges, the door for arbitration is closed. In that case, the exchanges will issue a public advertisement inviting public claims. So, investors have to be vigilant and keep track of the exchanges’ activities.
The Defaulters’ Committee in the exchanges distributes the amount available in the defaulter’s account to the admitted claimants on pro rata basis. In case the funds in the defaulter’s account are insufficient to meet the admitted value of claims, compensation is paid from the Investor Protection Fund, based on the recommendations of the defaulters’ committee, up to a maximum of ₹25 lakh (says NSE) and ₹15 lakh (BSE).
The guidelines are available on the websites of the BSE and the NSE.
