Another Delhi broker, F6 Finserve, defaults

NEW DELHI: New Delhi-based F6 Finserve has joined the list of stock brokers that have shut shop in the last couple of years after defaulting on payments to clients in the last couple of years. The stock broker, which shut shop last week, has not repaid clients more than Rs 100 crore amidst allegations of misuse of clients’ money to speculate in the market.

The promoters of F6 Finserve, Pankaj and Sumit Goel have allegedly sold shares of clients without their permission and are absconding. Shares of ice cream maker Kwality plunged almost 35 per cent between March 26 and April 2 after F6 Finserve sold a large chunk of Kwality shares, which belonged to the company’s directors.

“We have been informed by the investor (director) that….broker (F6) is not traceable and absconding,” said Kwality in a disclosure to stock exchanges.

The talk in the broking circle is that F6 used client money to take big bets in options and participate in the IPO grey market. F6 used investors’ idle funds to aggressively write options. These bets went awry after the fall in the market from early February.

In the last one year, at least 12 stock brokers have shut down and have been accused of not repaying client money worth over Rs 300 crore. In October 2017, New Delhi-based Amrapali Aadya Trading was declared defaulter by the NSE. Earlier brokers such as Kassa Finvest and Unicorn have also defaulted.

Delhi Broker F6 Finserve Defaults
Some of the brokers including F6 Finserve were indirectly operating as non-banking finance companies. They collected money from investors by opening broking accounts which was later used to fund other clients. While investors were assured of a fixed return of 12-14 per cent, brokers collected 18-20 per cent for margin funding.

Last year, the Securities and Exchange Board of India, in a move to prevent brokers from misusing client funds, made it mandatory to submit the data on clients’ funds lying with them, on the last trading day of every month on or before the next trading day.

F6’s clients have an option to approach exchanges, which are required to maintain an investor protection fund to compensate investors in case of defaults.

“The investors should approach the nearest regional investor service centre with an arbitration form and exchange will allot an arbitrator automatically who will follow the procedure and if the case is genuine, the investors will get a fund up to Rs 15 lakh within 120 days,” said Ashok Bakliwal, former president of the Bombay Shareholder’s Association.