A group of NSEL investors has filed a complaint with the Mumbai police, Enforcement Directorate and Sebi alleging that several brokers had lured clients to invest in NSEL's paired contracts by "financing them to the extent of 60% to 90% at lower rate of interest".

According to the NSEL Investors' Action Group, several brokers assured their clients that stocks lying in warehouses had been verified by them and even executed bulk purchase orders without client consent.

"Police is expected to file charge sheet in the NSEL scam soon. Hence, the timing of the complaint is questionable as it could be aimed at creating more hurdles and delaying the charge-sheet," said Alok Churiwala, spokesperson, BSE Brokers forum. "Brokers are open towards any kind of scrutiny. Just when investigations were progressing at the right speed and direction, efforts are being made to divert attention," he said.

The complaint says that the brokers acting on behalf of investors did not collect delivery orders or warehouse receipts (as per bye-laws). "In a criminal breach of trust the brokers gave away investors' money without securing the investor in return by collecting negotiable document like warehouse receipt/delivery order," said the complaint.

Since some of the brokers were acting as clearing and forwarding agents, then the onus to check stocks in the warehouse partly fell on them, said the complaint. Also, brokers collected transaction charges, delivery charges for stock that were inadequate or simply did not exist.

Brokerages that financed clients earned 10-12% as interest and 3-4 basis points commission on trades where there was 3-4% 'risk-free' spread for investors.

The complaint has also alleged that brokers had collected transaction charges for stocks that did not exist in the warehouses and some of them even "used their connections to take money out of the settlement guarantee fund of NSEL at the last moment before the exchange defaulted on payments to investors." The complaint also alleges last minute client code modifications by brokers and cancellation of large trade orders.

Keywords: NSEL investors, Mumbai police, Enforcement Directorate , Sebi alleging , broker, clients, invest, Alok Churiwala, spokesperson, BSE Brokers forum,commission,trades , trade orders