NSE issues investor warning on illegal dabba trading services

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NSE illegal dabba trading warning

Highlights

NSE has issued a warning that a Facebook page named 'Dabba Trading Brokers' is offering illegal dabba trading services and is not a registered member of NSE.
Under Section 23(1) of the Securities Contracts (Regulation) Act, 1956, violations can result in up to 10 years imprisonment, a fine of up to ₹25 crore, or both.
NSE clarified that investors on illegal trading platforms will not have access to the exchange's regulatory protection and grievance redressal mechanisms.

This article was translated from the original. Read the original version by our correspondent here.

Exchange action against illegal platforms

As NSE India has reported, the Facebook page "Dabba Trading Brokers" is providing dabba, i.e., illegal trading services to investors. The exchange clarified that the person or entity running this page and related social media pages is not registered as any of its members or authorized persons.

Investors are advised to stay away from any scheme or product offered in the stock market by any person or entity, as such offers are legally prohibited. The exchange has provided a "Know/Locate your Stock Broker" feature on its website, through which investors can verify registered brokers and their authorized persons.

NSE also stated that a police complaint has been filed in this matter. According to the exchange, such illegal trading platforms are neither approved nor supported by it.

Legal and financial risks for investors

The exchange said that under Section 23(1) of the Securities Contracts (Regulation) Act, 1956, any entity or person violating Sections 13, 16, 17, or 19 can be prosecuted. Upon conviction, the penalty can be up to 10 years imprisonment, a fine of up to ₹25 crore, or both.

According to Section 25, offenses punishable under Section 23 are cognizable, and state law enforcement agencies can also investigate them under the Bharatiya Nagarik Suraksha Sanhita, 2023. NSE also highlighted that dabba trading, apart from violating securities laws, also falls under Sections 316, 318, and 61 of the Bharatiya Nyaya Sanhita, 2023.

The exchange warned that trading on such prohibited platforms is at the investor's own risk, cost, and consequences. In such cases, investors will not have access to protections available under the exchange's jurisdiction, such as dispute resolution mechanisms and investor grievance redressal systems.

Our previous report discussed NSE's advisory for investors to remain cautious regarding investment tips and “guaranteed returns” claims made on social media by Dalpat Patel, highlighting that the individual is not a registered member/authorized person of the exchange, and investors can verify the legitimacy of a broker/authorized person using the ‘Know/Locate your Stock Broker’ feature.

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