Chennai: Wing Commander V Rajagopalan was in for a shock when he opened the mails from K Ltd his depository participant-cum-stock broking company in early December 2004.

For they were contract notes for futures trades of 400 Hero Honda shares worth a couple of lakh. Interestingly, the trades were never transacted by him either online or offline, that is, through telephonic orders to his broking company.

He immediately complained to the company and asked them to stop the trades and block the trading account till the correct entries had been made. Instead, the contracts continued to bombard him.

After repeated complaints, another executive of the broking company agreed to investigate how transactions were taking place in his account if the trades had not been agreed to by Rajagopalan. Fortunately for Rajagopalan, the broking company had installed telephone recording facilities to record all conversations between employees and the clients. The executive was able to trace the trades having been executed by his one of colleagues in the office.

Rajagopalan was immediately informed about what had happened. "I was told that this person had misheard the caller's identity number and keyed in my number," he says. Nevertheless, trades continued to happen in his account till 30^th December.

Finally, when the transactions stopped, Rajagopalan found he was down by Rs23,000, and was asked by the broking company to pay up this amount. The baffled air force officer refused. Now another shock awaited him — the broking company appropriated his security deposit of Rs20,000 and sent him a notice to pay the remaining Rs3,000.

On Rajagopalan's refusal to pay, the broking company sold some of his Petronet LNG shares from his demat account and appropriated the proceeds.

Meanwhile, the broking company's executive whose error had led to the all round confusion, agreed to make good the loss through day-trading in shares on Rajagopalan's behalf and asked him for some margin money. When Rajagopalan refused to give the money, the executive agreed to participate in day trading in order to compensate the losses to the air force officer.

The day trading began taking place in Rajagopalan's account. Like any other investor, Rajagopalan didn't want to rock the boat and kept quiet when contract notes of the daily trades began to arrive in his mailbox.

"As the market was booming this executive got me some shares of Indraprastha Gas valued around Rs10,000. With Rs13,000 still to be made good, this executive asked for some cash so that he could improve the rate of his trading. Since I wanted to end this business as soon as possible, I transferred Rs30,000 to the broking company," says Rajagopalan

And, there the matter rests except that the Indian Air Force officer is still awaiting the remaining Rs13,000 to be made good to him.

The episode raises some unanswered questions:

• Firstly, what safety do clients of broking companies enjoy?
• According to the broking company's website the person who attends the call / trade dealer have to identity of the customer by asking a set of questions, which are filled at the time of registration. Only after the identity is verified, would a customer be able to place / modify / cancel the orders. How the trade dealer did the verification in Rajagopalan's case still remains a mystery.
• Why didn't the broking company take any action on the Rajagopalan's complaints to the customercare section?
  
• Further, how did the broking company appropriate Rajagopalan's security deposit and liquidate his shares after he complained of the unauthorised trades in his account?
  
• Who is to blame for the entire mess? If the company is blameless then who is responsible for the deliberate wrong trades that were executed in Rajagopalan's account.
  
• How were unauthorised day trades taking place in his account to make good the security deposit misappropriated from his account?

(The identity of the broking company and its employees has been witheld at the express request of Wing Commander Rajagopalan so as not to jeopardise the prospects of recovering the remaining portion of his security deposit appropriated by the company.)