Dos And Don’ts While Investing In Stocks Or Saving Schemes Through Brokers

Investing is a way to grow your wealth over time. By investing in stocks, mutual funds, or other saving schemes, an investor sees the potential to earn returns that can help him/her achieve financial goals.

Investing can also help you save for future goals like buying a home, paying for college, or starting a business. By investing in assets that have the potential to earn returns, you can grow your savings over time.

Some people invest in assets like dividend-paying stocks or rental properties to generate passive income.

As investing is a task which needs a thorough understanding of the scheme, many people seek help from an agent or broker to streamline the process. However, there are certain things which an investor needs to keep in mind before engaging with a broker.

Also Read: How To File A Complaint Against Mutual Fund?

Securities and Exchange Board of India has also listed Dos and Don’ts while dealing with brokers and sub-brokers.

Dos

• Deal only with SEBI registered intermediaries.
• Ensure that the intermediary has a valid registration certificate.
• Ensure that the intermediary is permitted to transact in the market.
• State clearly who will be placing orders on your behalf
• Insist on client registration form to be signed by the intermediary before commencing operations.
• Enter into an agreement with your broker or sub-broker setting out terms and conditions clearly.
• Ensure that you read the agreement and risk disclosure document carefully before signing.
• Make sure that you sign on all the pages of the agreement and ensure that the broker or a representative authorised to sign, signs on all the pages of the agreement. Also the agreement should be signed by the witnesses by giving their name and address.
• Insist on a valid contract note/ confirmation memo for trades done each day 24 hours of the transaction.
• Sign the duplicate contract note/ confirmation memo, to be kept with the broker once you receive the original.
• Insist on a bill for every settlement.
• Ensure that the broker’s name, trade time and number, transaction price and brokerage are shown distinctly on the contract note.
• Insist on a periodic statement of accounts.
• Issue cheques/drafts in the trade name of the intermediary only.
• Ensure receipt of payment/ deliveries within 48 hours of payout.
• In case of disputes, file a written complaint to the intermediary/ Stock Exchange/SEBI within a reasonable time.
• In case of sub-broker disputes, inform the main broker about the dispute within 6 months.
• Familiarise yourself with the rules, regulations and circulars issued by stock exchanges /SEBI before carrying out any transaction.
• Give clear and unambiguous instructions to the broker/ sub-broker.
• Keep a record of all the instructions issued to the broker/ sub- broker.
• Keep track of your portfolio in your Demat A/c on a regular basis.

Don’ts

• Do not deal with unregistered intermediaries.
• Do not pay more than the approved brokerage to the intermediary.
• Do not undertake deals for others.
• Do not neglect to set out in writing orders for higher value given over the phone.
• Do not sign blank Delivery instruction slip(s) while meeting security pay-in obligation.
• Don’t accept unsigned/duplicate contract notes/confirmation memos.
• Don’t accept contract notes/confirmation memos signed by any unauthorised person.
• Don’t delay payment/deliveries of securities to broker/ sub-broker.
• Don’t get carried away by luring advertisements, if any.
• Don’t be led by market rumours or get into shady transactions.

National Savings Institute has listed Dos and Don’ts for investors while investing through agent National Savings Schemes. In case one decides to avail the services of authorised agents, the following is the advice;

• Establish identity of authorised agents by checking his certificate of authority and date of validity of the agency
• Fill in the application form yourself. However, help/guidance of the agent may be availed
• Always insist for authorised receipt duly completed by the agent while handing over money/instruments and documents to the agent for opening an account or making a deposit. These receipt books are supplied by Government to the agents (authorised agents receipt books and ASLAAS – 5 cards for MPBKY agents)
• Preserve counterfoils of the ASLAAS 5 cards till maturity of the account
• If an agent declines or avoids the issue of receipt book/ASLAAS card, do not entertain him/her and report the matter to the Postal/District Authorities.
• Ensure receipt of passbook from the agent within 10 days from the date of investment. In case of non-receipt of passbook from the agent within 10 days from the date of investment, lodge a complaint with either Appointing Authority; Regional Director, National Savings Institute; Concerned Postmaster.
• Invariably verify the correctness of the amount, date, stamp, signature etc. mentioned in the Passbook from the concerned Post Office from time to time
• Do not hand over the cash to any unauthorised person or issue a cheque in favour of an agent.
• For investment over and above Rs 10,000; issue only an account payee cheque drawn in favour of concerned Postmaster.
• Do not fill/sign the withdrawal form before maturity.

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