Give your broker specific investment directions
Disputes often arise between investors and their intermediaries regarding actions taken in equity markets. Problems arise when investors suffer losses and then blame games ensue.business Updated: Jun 23, 2008 20:22 IST
Disputes often arise between investors and their intermediaries regarding actions taken in equity markets. Problems arise when investors suffer losses and then blame games ensue. This is a common occurence when it comes to stock dealings, because a lot of authority is given to brokerage firms regarding transactions. There are a few things that need to be taken care of by investors to protect their position.
Clear instructions should be given to the brokerage regarding the nature of action that can be undertaken on their account.
Lack of clarity in instructions is the root cause of many problems for investors. There are often disputes as to what should have been done with the money and what should not have been permitted, but when the instructions are clear, there is no scope left for confusion. There are times when action in some area of the market can lead to a position that causes a financial impact and hence the areas of operation need to be made clear through specific instructions.
There are many investors who are not very conversant with the happenings in the market and therefore they just give the money to the broker to invest on their behalf.
The moment they give the money, they also need to give an idea about the areas that should be used and those that should be avoided. A new investor who cannot afford to lose much, because they are just starting out, would do well to stay clear of the futures and options space. Here the gains can be high but the loss can also be crippling. New investors might find this very difficult to bear.
It is also better for everything that is authorised by the investor to be present in writing.
This will help settle any dispute that may arise at a later date. In many cases the instructions are verbal and when it comes to any dispute, it is difficult to prove anything one way or the other. When the directions are written, then several clarifications can also be obtained from the entire situation, and this will ensure that the details are followed by the broker. This will eliminate future problems, as the situation is clear.