A brokerage house in Vile Parle, Mumbai, Anugrah Stock and Broking Pvt Ltd, has been accused of cheating investors across the country, including a senior executive of an Indian multinational company, of hundreds of crores. A number of clients have found that they no longer hold shares despite having made investments.
The company has rebutted the allegation and claimed that the clients’ shares were sold “wrongfully” by the clearing house of which it was a member.
A senior official said the National Stock Exchange (NSE) received several complaints in the last three days, but added it was too early to give an estimate of the alleged fraud.
A brokerage firm helps clients buy and sell securities on the market and also offers other financial services. Each has to be a part of a clearing house, which facilitates the exchange of securities and money or derivative transactions and reduces risks of defaults by the brokerage firm. Anugrah was a member of clearing house.
Clients began visiting the office of Anugrah, founded in 2003, around 10 days ago after rumours began to float that it had stopped making payments and that its owner, Paresh Kariya, had gone incommunicado. IT professional Anand Sarraya from Indore, who had invested around Rs 25 lakh, got a sense of foul play around two weeks ago when he couldn’t access his demat account and found that Anugrah’s servers were down.
The senior executive of the multinational company, who had invested in shares worth Rs 50 lakh through the brokerage firm, said it used to send him the account statement regularly which reflected his investments. “After hearing the rumours, I checked my account with the depository service and found that not a single share was listed against it.” He raised the suspicion that Kariya was running his own trading account and sold clients’ shares to cover his losses. “All clients had given him the power of attorney to do trading on their behalf.”
Most clients realised they were cheated only after they checked in with their depository service firms, said Bhanu Rajgopalan, a businessman from Nagpur, who, too, made investments of Rs 50 lakh and filed complaints with the Securities Exchange Board of India (SEBI) and the NSE on Thursday against Anugrah. “How is it that the brokerage firm’s statements showed investments but those with the depository service company didn’t? This means the broker and the clearing house sold clients’ shares without their knowledge.”
A depository service company keeps investors’ securities in an electronic form–just as a bank keeps all cash in an account–and provides all services related to cash transactions. In India, there are two major companies, the Central Depository Services Ltd and the National Securities Depository Ltd, offering such services.
A Vile Parle resident alleged that Anugrah’s officials are parrying questions from desperate clients. “Every day, at least 100 people visit the office but no one’s telling us what has happened to our investments. Why hasn’t the NSE or the SEBI initiated action even after receiving multiple complaints?”
South Mumbai businessman D Shah, whose investments worth lakhs are on the line, echoed him. “There is no clarity from the NSE and the SEBI. I don’t know what to do next if they don’t take action. Someone should tell us if our money is stalled somewhere or is lost forever.”
The NSE official said nearly two months ago, Anugrah was found running a derivative trade advisory service– in which an investor enters into an agreement to trade at a future date or a certain price–and was suspected of using clients’ funds to make investments of its own. “We suspended its derivative trading licence, but Anugrah filed an appeal with the Securities Appellate Tribunal and got stay on our order on August 17,” said the official. The tribunal, however, laid down a condition: it had to deposit clients’ investments of Rs 165 crore with the NSE within two weeks and the amount would stay with the NSE till a final order is issued. With just three days to go, Anugrah is yet to make the deposit.
The NSE official said all complainants have been asked to submit investment documentation.
An email and a phone call to the SEBI spokesman were unanswered.
Kariya said he is “in touch” with clearing house to recover the shares that he insisted were wrongfully sold. He denied the allegation that Anugrah had done any trading of its own or had used client’s shares to make up its losses. “I have a separate partnership company, through which I carry out personal trading.”
The clearing house did not respond to phone calls, text messages and an email.