Easy to avoid a fraud

If I asked you what is common to Harshad Mehta, Ketan Parekh, Hometrade, Madoff, ‘Sir’ Stanford…you will find the answer very easy, correct?

All of them played with other people’s money and defrauded millions…What was common to their victims?

None of them played with small people’s money. The victims (yes there were some small people too) were by and large big banks, corporates, and the type. However thanks to the Regulator’s inability to keep G-secs in demat form all the Indian fraudsters were allowed to comingle the assets.

Let me explain. If you go to ABC securities who opens a PMS account for you, and you open a demat account with ABC demat services and you go to some small co-operative bank…and give your discretionary PMS, God save you!

If you must engage a broker / pms provider do not allow him to have full access to your account. If he can move the shares in and out of your account (almost a pre-requisite for PmS these days, surely for all broking accounts) you are iniviting trouble. Harshad told the smaller bank..”I have bought Rs. 3 crores of G-sec for you” and gave them a receipt…In case of Madoff he did no buying. However he controlled the demat, the bank, the brokerage….and could easily keep up the facade.

Be thankful for a deep cut recession in the market. It dried up his funds and out came the cat…same for ‘Sir’ Standford…

So be careful. If you already have an account….well that is for another day!

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