The company cited that few recent incidents have raised eyebrows, where brokers have been allegedly accused of misusing client funds for their own trading. This affects the retail investor’s confidence in keeping the funds with brokers and poses a potential risk to their stocks & collateral. And a broker must avoid such situations which places them in a position where their duty to their client is at odds with their personal interests.
How Pro Account Trading is Bad for Clients?
Whenever a broker becomes a member with a particular exchange, the exchange enables client based trading and pro-account trading account for the broker. And the client’s funds and the broker’s fund are held in one omnibus account. Majority of brokers, make use of the pro-account and trade in their own account, using their own money. However, since the funds are mingled at the exchange level, there is no defined parameter to track fund utilization during intra-day trading and any possibility of losses or default may affect the client’s funds lying with the broker.
Only a handful of brokers in India have their proprietary trading account deactivated. And Finvasia is glad to have joined the list.
“Our decision to close proprietary trading will help end conflicts of interest and showcase our commitment to focus on our primary mission of democratizing the Indian retail broking space to ensure that clients are not forced to bail out brokers’ sour bets,” said Tajinder Pal Singh, CEO, Finvasia.
Finvasia is positive that this approval will boost client confidence and they will be more confident about the safety of their funds with the broker.
