FINANCIAL EDUCATION: Dos and Don't of Investment

ISSUE OF SECURITIES

DOS
Read the Prospectus/ Abridged Prospectus and carefully note:

In case of any doubt/problem, contact the compliance officer named in the offer document.
In case you do not receive physical certificates/credit to demat account orapplication money refund, lodge a complaint with compliance officer of issuer company and post issue lead manager as stated in the offer document

DON’TS

Do not fall prey to market rumours.
Do not go by any implicit/explicit promise made by the issuer or any one else.
Do not invest based on bull run of the market index/scrips of other companies in same industry/issuer company.
Do not bank upon the price of the shares of the issuer company to go up in the short run.

INVESTMENT IN THE DERIVATIVES

DOS

Go through all rules, regulations, bye-laws and disclosures made by the Exchanges.
Trade only through - Trading Member (TM) registered with SEBI or authorised person of TM registered with the exchange.
While dealing with an authorised person, ensure that the contract note has been issued by the TM of the authorized person only.
While dealing with an authorized person, pay the brokerage/payments/margins etc. to the TM only.
Ensure that for every executed trade you receive duly signed contract note from your TM highlighting the details of the trade along with your unique client-id.
Obtain receipt for collateral deposited with Trading Member (TM) towards margin.
Go through details of Client-Trading Member Agreement.
Know your rights and duties vis-à-vis those of TM/ Clearing Member.
Be aware of the risk associated with your positions in the market and margin calls on them.
Collect / pay mark to market margins on your futures position on a daily basis from / to your Trading member.

DON’TS

Do not start trading before reading and understanding the Risk Disclosure Documents
Do not trade on any product without knowing the risk and rewards associated with it

COLLECTIVE INVESTMENT SCHEMES (CIS)

DOS

Before investing ensure that the entity is registered with SEBI.
Read the offer document of the scheme especially the risk factors carefully.
Check the viability of the project.
Check and verify the background/expertise of the promoters.
Ensure clear and marketable title of the property/assets of the entity.
Ensure that the Collective Investment Management Company has the necessary infrastructure to carry out the scheme.
Check the credit rating of the scheme and tenure of the rating.
Check for the appraisal of the scheme and read the brief appraisal report.
Read carefully the objects of the scheme.
Check for the promise vis-a-vis performance of the earlier schemes in the offer document.
Ensure that CIMC furnishes a copy of the Annual Report within two months from the closure of the financial year.
Note that SEBI cannot guarantee or undertake the repayment of money to the investors.

DON’TS

DEALING WITH BROKERS & SUB BROKERS

DOS

Deal only with SEBI registered intermediaries.
Ensure that the intermediary has a valid registration certificate.
Ensure that the intermediary is permitted to transact in the market.
State clearly who will be placing orders on your behalf
Insist on client registration form to be signed by the intermediary before
commencing operations.
Enter into an agreement with your broker or sub-broker setting out terms and conditions clearly.
Insist on contract note/ confirmation memo for trades done each day
Insist on bill for every settlement.
Ensure that broker’s name, trade time and number, transaction price and brokerage are shown distinctly on the contract note.
Insist on periodical statement of accounts.
Issue cheques/drafts in trade name of the intermediary only.
Ensure receipt of payment/ deliveries within 48 hours of payout
In case of disputes, file written complaint to intermediary/ Stock Exchange/SEBI within a reasonable time.
In case of sub-broker disputes, inform the main broker about the dispute within 6 months.
Familiarise yourself with the rules, regulations and circulars issued by stock exchanges/SEBI before carrying out any transaction

DON’TS

Do not deal with unregistered intermediaries
Do not pay more than the approved brokerage to the intermediary.
Do not undertake deals for others.
Do not neglect to set out in writing, orders for higher value given over phone.
Do not sign blank Delivery instruction slip(s) while meeting security payin obligation
Don’t accept unsigned/duplicate contract note/confirmation memo
Don’t accept contract note/confirmation memo signed by any unauthorised person.
Don’t delay payment/deliveries of securities to broker/ sub-broker.
Don’t get carried away by luring advertisements, if any.
Don’t be led by market rumours or get into shady transactions

FINANCIAL EDUCATION