Cheated By Your Stockbroker? - Here Is How To Avoid The Fraud

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  • 01 Feb 2023
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Stock markets have gained more and more popularity in recent years. But whether you have already invested your money in stocks or not, at least you must know about these markets and where to save your valuable amount for a better future. It is undeniable that the stock market is one of the most powerful tools for making money. But with the numerous crashes, scams and fraudulent schemes that people fall for every year, it has become a somewhat risky prospect for those just getting involved with investing. We've looked at how to avoid these common pitfalls, so you can get started investing securely.

Security Measures to Prevent Fraud

  • Check before Signing:

When working with a stockbroker, one golden guideline is never to sign any document blindly. Your signature on the paperwork proves that you willingly agreed to something. You should only sign documentation if you are satisfied with the contents, particularly the section titled PoA (Power of Attorney).

  • Avoid Hype Trains:

The world of investments and marketplaces are full of uncertainties. There will come a moment when everyone will excite a specific stock or begin selling a particular share. You are strongly advised to make your selections after thoroughly investigating and comprehending the hype. If you mindlessly follow a hype train, you will almost certainly lose money in the long term.

  • Avoid Future and Option Traps:

Future and Options (F&O) trading is frequently regarded as a high-risk trading segment. Stockbrokers have been reported to entice new investors who don't have the tools and knowledge of this segment by promising large sums of money overnight. Again, do not be taken in by these. Make your judgments based on your research and make sure you understand all the instruments you're trading in.

  • Research:

Some stockbrokers are only motivated to earn their commission, and thus, may even dupe investors into investments that frequently result in losses. The best defence against this is to research everything your broker advises.

  • Avoid unlicensed sub-brokers:

A significant concern with new investors is that they seldom undertake background checks on their stockbrokers. They are content with anything they can obtain at a reduced price. While it is advised that you shop around and find someone within your price range, they must be licensed. There is a comprehensive list of registered stockbrokers on the BSE and NSE websites. When looking for a broker, they should be your primary focus.

  • Do not provide Power of Attorney:

You must not give your broker the power of attorney, whether voluntarily or involuntarily. They can abuse their trading privileges and initiate transactions without your consent.

Conclusion

Don't wait around if you're serious about investing in the stock market. Start by opening a Demat Account with Kotak Securities. The experts at Kotak Securities can give you advice and help you make more informed decisions in the future. If specific financial products sound too good to be true, it's probably because they are; don't fall for those scams. And above all else, remember the above tips, so you don't get caught up in any significant disasters.

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