Hyderabad: A few days back, a stock broker-cum-depository participant was accused of transferring Rs 344 crore worth mutual fund units of Odisha Cement to its own accounts without the authorisation of the investor, creating doubts in the minds of existing and potential investors about the safety of their money.
According to reports, Sebi found that Allied Financial Services a broker and a depository participant, had transferred Odisha Cement's MF units to its promoter's accounts for using them as collateral to trade in the futures and options market.
For uninitiated, the futures and options (F&O) market is a segment stock market, where investors trade in derivatives by entering into a contract to sell an underlying asset at fixed price on a future date.
"Trading in F&O is nothing short of gambling. It is immoral and illegal to use somebody else's money to invest in F&O market," said A.P. Bakliwal, Former Member, Sebi Mutual Fund Advisory Committee.
According to Dhirendra Kumar, the CEO of Value Research, the incident has revealed a big gap in the system. "But it is a one-off incident related to corporate investor and not individual investors."
Explaining further, Mr Kumar said such diversion cannot happen in demat of individuals because redemption money cannot to go anywhere other than the bank account through which it was invested.
In case of corporates investing in the stock markets, Mr Kumar said the authorised signatories may change from time to time according to the wishes of the concerned board.
Mr Kumar feels people should not press the panic button as it is very difficult to transfer an individual investor's money from his MF account. "The diversion in individual mutual fund accounts happen only if information used for two-factor verification was compromised due to the ignorance of the individual," the Value Research CEO explained.
Mr Bakliwal, who is also the former President of Bombay Shareholders Association, said the individual investor's money in mutual fund is protected to the extent of Rs 15 lakh. "Even in the event of default of broker or DP, the individual investor will get back his money to the extent of Rs 15 lakh from the Investor Protection Fund." Mr Kumar gave credit to Sebi for solving many investor issues.
"Over a decade ago, people were allowed to write cheques for investing in other's names. This created a potential for misuse. To plug this lacunae, Sebi mandated that one must invest money from one's own account. If someone wishes to invest in his wife's name, he must transfer money to her account. So that the money comes back to the same account," Mr Kumar explained....