In a landmark ruling, the National Consumer Disputes Redressal Commision has ordered that investors can get up to a lakh of Rs from the stock exchange to which the defaulting broker is attched.
Several consumers had filed complaints before the Delhi consumer forum against a broker as well as the Delhi Stock Exchange, for default with respect to the sale and purchse of shares. The matter then went in revision before the national commission, which was of the same opinion. It held that not only does the broker render 'service' in the purchase and sale of listed securities but the stock exchange is also required to render service to the investors. Hence the stock exchange is also service provider and liable under the Consumer Protection Act.
The next issue was the extend to which an investor would be entiteled to protection. The rules governing the customer protection fund provide that comensation on an investor's claim shall not exceed Rs l lakh subject to a maximum of Rs25 lakh per defaulter. The national commission made a number of observations; it said DSE is a profit making body since it issues tickets (membership cards) as well as bonus tickets for trading rights to its member brokers. The member broker, in return, charges brokerage from investors on a scale prescribed by DSE, which controls and organize the mode, manner and performance of the contract between the investor and its member brokers. Share broker cannot do business in security transaction without becoming member of the stock exchange.
The stock exchange is also required to maintain the Stock Exchange Customers Protection Fund. Members are required to be a member of this fund and make a yearly contribution. Consumers can now hold the stock exchange liable if a broker defults. But claims should be restricted to the actual loss involved in the transaction or Rs l lakh, whichever is lower. However, several investors are duped by this broker and the total sum ecxceeds Rs25 lakh , then the claim of each investor would have to be worked out proportionately by pro-rata basis.
This article was pulished in times of India on 14 jan 2008.
friends your views please.
Several consumers had filed complaints before the Delhi consumer forum against a broker as well as the Delhi Stock Exchange, for default with respect to the sale and purchse of shares. The matter then went in revision before the national commission, which was of the same opinion. It held that not only does the broker render 'service' in the purchase and sale of listed securities but the stock exchange is also required to render service to the investors. Hence the stock exchange is also service provider and liable under the Consumer Protection Act.
The next issue was the extend to which an investor would be entiteled to protection. The rules governing the customer protection fund provide that comensation on an investor's claim shall not exceed Rs l lakh subject to a maximum of Rs25 lakh per defaulter. The national commission made a number of observations; it said DSE is a profit making body since it issues tickets (membership cards) as well as bonus tickets for trading rights to its member brokers. The member broker, in return, charges brokerage from investors on a scale prescribed by DSE, which controls and organize the mode, manner and performance of the contract between the investor and its member brokers. Share broker cannot do business in security transaction without becoming member of the stock exchange.
The stock exchange is also required to maintain the Stock Exchange Customers Protection Fund. Members are required to be a member of this fund and make a yearly contribution. Consumers can now hold the stock exchange liable if a broker defults. But claims should be restricted to the actual loss involved in the transaction or Rs l lakh, whichever is lower. However, several investors are duped by this broker and the total sum ecxceeds Rs25 lakh , then the claim of each investor would have to be worked out proportionately by pro-rata basis.
This article was pulished in times of India on 14 jan 2008.
friends your views please.