choosing the right broker is crucial to a successful investing experience

Choose Carefully

Finding The Right Broker

• Registered Brokers Only Check if it is registered with Sebi and stock exchanges. Besides lowering the risk of fraud, it also ensures that you can approach the regulator should a dispute arise.
• Credential check Find out the broker’s track record and the level of service it delivers. The website of the regulator and the stock exchange is a good starting point for this.
• Sound initial documentation Make sure that you produce the KYC form and sign the member-client agreement, and read them thoroughly before you sign on the dotted line.
• Track of all trades Ensure that you get a contract note for each day you trade. The contact note confirms that the broker has executed trade on your behalf. It could come in handy in case of a dispute.

• To invest in the stockmarket, one has to avail the services of a broker or a sub-broker. They are intermediaries who provide an interface to buy or sell stocks. It is for this reason that it is important to know how to deal with them. Here we list a few basic points that you cannot afford to ignore while selecting a broker.

  Check whether it is registered. The first rule in selecting a stockbroker is to check whether it is registered with the Securities and Exchange Board of India (Sebi), the market regulator, and stock exchanges. Even if it is a sub-broker, avail its services only if he is registered. This will help you in two ways. First, the chances of fraud are less. Second, if you find any shortcomings in its services, or if you find that you are being charged higher than what is mentioned in the contract, you can take this up with the regulator. However, regulators may not be able to intervene if you have taken the services of an unregistered broker.

  Check his credentials. This is the second step of investigation. You need to check the credentials of a broker beyond its registration with the regulator. For this, you have to go through the websites of Sebi and the stock exchanges. If the broker has been slapped with a fine or debarred from some activities in the market, you will come to know about it this way. Several such instances do raise a question mark on the integrity and services of the broker. You should also speak to existing clients of the broker to get an idea about the quality of its services.

  Ensure the initial documentation is sound. Make sure that you produce all the documents needed to open an account with the broker in order to avoid hassles in future. One of the most basic documents is the KYC (Know Your Client) form, which requires you to produce things such as identity and address proof, as well as PAN details.

  Another document that you will come across is the Member-Client Agreement, a pact between you and the broker in which you agree to trade through the broker and the broker approves of the genuineness and financial soundness of the client. Do not forget to go through risk disclosure section, which specifies the risks involved with investing. You would also get a unique code that you are supposed to quote in all communication with the exchange.

  Most importantly, many a time customers find that the broker is charging much higher than what it earlier promised. In all likelihood, this is because the broker was hiding a few charges to get the customer. Therefore, you should carefully go through agreement between you and the broker, which clearly specifies the various services and the corresponding charges. Also, keep a copy of these documents—you may need them later.

  Keep track of trade-related documents. Brokers are required to send a contract note after each day’s trade. The contract note contains all the information related to the trade. It confirms that the broker has executed a particular trade on your behalf. If you do not receive them, do not forget to ask it from your broker immediately. Should a dispute arise, it could come in handy.