Orion broking bankruptcy – lesson to learn!
Fellow traders & investors,
Has been a while since I wrote a post. Writing this to reiterate the lessons to learn while choosing a broker. I had written this post when Unicon securities went bankrupt a while back, saying how we should not go with any broker who seems willingly wanting to violate rules and regulations.
Orion broking had its primary website as : http://www.orionbroking.com/ offering brokerage services in both Equity and Commodity. The company which is based out of Coimbatore, the promoters are currently underground. Cops are investigating the case now, check this news article.
Have interacted with the promoters a few times, and they for sure are definitely not crooks. Their business model was to entice clients with extreme amounts of leverage. Trade with Rs 2000 for 1 lot of Nifty and Rs 3000 for Bank nifty. In commodities they would give any leverage that you ask for, even let you trade the big gold contract with less than Rs 5000 in the account. The website doesn’t really talk about these leverages anywhere, but if you speak to any of their clients you will know.
On August 20th, Globe capital who is a clearing member of Orion squared off all their positions due to not being able to meet the MTM(marked to market) requirement. Standing now, after the positions were squared off, Orion owes over Rs 40 crores to Globe capital and the exchanges. This is after Orion broking’s personal and client funds which was already debited by the exchange/clearing member to meet obligations. Client funds would have anyways been debited, but what is shocking is that the promoters even liquidated stocks lying in the client demat accounts to meet exchange obligations. So currently all clients of Orion broking who had any money or stock with them are in a soup. Yes, there is Investor protection fund by the exchanges, but it will take its own sweet time.
*An update on Orion Broking Services – The active directors of Orion Broking Services have been arrested on 8th March 2016, on the grounds of the following as per the Indian Penal code –
1. Section 120B (punishment for criminal conspiracy)
2. Section 409 (criminal breach of trust by public servant, or by banker, merchant or agent)
3. 420 (cheating and dishonestly inducing delivery of property)
Kindly go through this article to know more :- http://www.thehindu.com/news/national/tamil-nadu/prime-accused-in-stock-broking-scam-held/article8333481.ece. A further probe is now being instigated against them.
Lesson to Learn?
This just goes to show that, chasing the broker who provides the highest margin may not be the best thing for you. Leverage is a double edged sword, it can not only wipe out your account in a hurry, but also the broker’s. Ensure that you choose a broker who is not over leveraging themselves and their clients.
Empowering Indian retail investors/traders,