INSUBCONTINENT EXCLUSIVE:
derivatives, brokers could play around with idle stocks of unsuspecting investors
For some intermediaries, it was a neat business model to quietly raise money
Every fraud feeds on a weak link
Investors, attracted by low fee and trading convenience, ran demat accounts with brokers (instead of banks), freely borrowed from them to
buy shares, and gave intermediaries the power of attorney to operate accounts
Brokers pledged these shares, which technically belonged to their clients, to raise money
The funds were used to speculate in derivatives, finance other clients, and even bet on illiquid assets such as property
These deals are irregular and opaque, and mask the true extent of leverage in the financial market
intermediaries are yet to unwind their positions, recover funds and regularise the accounts
But, time and again, crooked operators have taken advantage of unwary investors