A few days ago, we had highlighted how brokers in the real estate industry were colluding with developers and buying huge number of flats from them in a bid to create a perception of scarcity and hence, keep the prices from falling further. Well, if a leading daily is to be believed, a similar collusion seems to be happening in the stock markets...in the IPO market to be precise.
Here, brokers and sub-brokers are seen providing cash incentives to retail investors in a bid to use their demat accounts and subscribe to an issue on their behalf and also pay fully for the same!
Apparently, the brokers and sub-brokers seem to be resorting to such means at the behest of investment banks who are finding it hard to get retail investors to subscribe to IPO issues as they have not yet come back to equities in a big way. Hence, the request for their demat accounts to be rented out. Interestingly, this practice has been prevalent for many years now despite SEBI rules that prohibit brokers from paying incentives to investors.
While both investment banks as well as brokers are at fault here, investors who get lured by such schemes aren't covering themselves with glory either as they are sending out a wrong message to their fellow investors - that of the issue getting subscribed because of good quality.
It's time someone does something about it because if allowed to go unchecked, it may give distribution of wealth a whole new meaning. You as an investor also share the responsibility of curing this menace...by not accepting a 'cash reward' from your broker to rent out your demat account.
Have you ever accepted a 'bribe' from your broker to invest in a particular IPO?
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