12 steps to avoid fraud in the stock market

• Any system that has been put in place by humans is bound to have some of the flaws.
• The stock market is one such system.
• It is fuelled by the ambition of the traders to make more and more profits.
• Due to this, fraud in the stock market, whether small or large in scale, is something that every trader should be prepared to deal with.
• Also, you should take action whenever it is advisable.
• Fraud in the stock market can lead to huge financial ramifications for the victim, which will also negatively impact everything in their life.
• Due to this, we bring to you 12 steps that you, as a trader, should consider to avoid frauds in the stock market.

Steps to Avoid Fraud in the Stock Market

There are in total 12 main steps that should be taken into account to avoid fraud in the stock market.

The following are those 12 steps:

1. Never entrust your funds with all those unregistered stock brokers.
2. Be aware of the brokers as well as their associates, as they are not authorized to offer fixed/guaranteed/regular returns/capital protection on your investment. You should also be careful about entering into any of the loan agreements while paying interest on the funds that are offered by you.
3. Any documents that will require you to fill in your details should only be done by you and not by any second or third party.
4. You need to update your email ID and phone number in the exchange records as and when you will change them.
5. Any discrepancy between the verification emails or messages and contract notes or statements should be reported immediately.
6. Based on the frequency of the account settlement opted for, you need to make sure that your broker will settle your account and send the statement of accounts within the stipulated time frame.
7. You should also verify that your consolidated accounts statement (CAS) is consistent with your transactions regularly so as to avoid fraud in the stock market.
8. The payout of the funds and the securities, as well as the contract notes, should only be received by you and that too within 24 hours. Anything post-24 hours can be considered to be a sign of fraud in the stock market.
9. Never keep your funds idle with the stock broker.
10. You should keep in mind that the brokers can take the securities that are belonging to their clients only for the settlement of the securities that are sold by the client and not for any other purpose. If your broker is asking you to keep the securities as collateral, then it is a clear sign of fraud in the stock market.
11. The trader should clearly define the limits and timeframes of the power of attorney they assign to their broker, which is also not a mandatory requirement to avoid fraud in the stock market.
12. You should never share the login details of your registered trading account with anyone.

What recourse can you take in the case of fraud in the stock market?

• The aforementioned steps are very effective in preventing fraud in the stock market, but they are not foolproof.
• So, what to do if the fraud has already occurred?
• If any of the traders has found himself to be a victim of the fraud in the stock market, then they can directly approach and file a complaint with the Securities and Exchange Board of India (SEBI).
• If not SEBI, then any other stock exchange that will fall under their purview.
• For this purpose, SEBI should establish a dedicated complaint cell called the SEBI Complaint Redress System (SCORES).

Conclusion

With this blog, readers will be able to make more informed decisions and also be able to make thorough preparations to tackle the corruption in the Indian stock market.

Frequently Asked Questions (FAQs)

Q1) How can we prevent fraud in the stock market?

The best way to prevent fraud in the stock market is to go for legitimate investment firms.

Q2) Who is the No. 1 stock market trainer in India?

Arun Singh Tanwar is the No. 1 stock market trainer in India.

Q3) What regulates the stock market to prevent fraud?

Securities and Exchange Commission (SEC) will regulate the stock market to prevent fraud.

Q4) How do you protect your stock?

You can protect your stock by diversifying your holdings over different asset classes and choosing the assets that are non-correlating.

Q5) Who is India’s most trusted trader?

Premji and Associates is India’s most trusted trader.

About Us

Nifty Trading Academy is our academy where we teach you about the stock market as well as technical analysis. We also provide live trading sessions and upload blogs for the same.