I had started life as a sub-broker in the late ‘87. Since I had been an investor for a long time and had met many sub-brokers and brokers, this was a decent transition. Saw the market at really low levels (retrospectively speaking) and did a good business right up to and during the Harshad Mehta scam. Luckily for me, Harshad took many of my penny stocks to stratosphere and I decided to convert most of it into an office. I would say luckily because I belong to an era of Mumbai which believed that an office in south Mumbai or a brokerage card can only be inherited. You do not buy a South Mumbai office when you are 28 years old, with your own money!
However, fate intervened! A client whose Income Tax work I used to do joined a small brokerage firm as a CEO. He was looking for sub-brokers. We had a small private limited company with a net worth of about Rs. 10 lakh which became a sub-broker.
A Gujarat based company (Gujarat Rodrel group) “printed” fake shares and sold them through the broker (where I was a sub-broker). Clearly the main broker got cheated. He coolly defaulted. He did not pay us. Amount of default to us: Rs. 15 Lakhs (circa ’93 Jan).
What did I do:
When you get cheated, you cry, scream and shout. I did not cry but went to the media, police and the politician. Nothing happened. Media wrote about it for 3 days – in the business page it was the lead story. The policeman who handled the case was a rank holder in IIT, understood the case in 20 minutes, but could not nail the stock exchange for siding with the fraudsters – he got transferred in another high profile case. However, I was thrilled by the way he handled it. The politician I went to was also HUGE – he is still in the national scene, but my broker (now dead) ran away from the country J
Learning:
Even for a moment we did not think we could walk away from the liability towards our clients. I sold all my shares in a depressed market and paid off all the clients. My office stayed with me. My clients stayed with me. All are still in touch – but I no longer deal in retail products. My project of buying a NSE membership stayed – they asked me not to pitch in any capital (circa ’93).
Honesty is optional, so is peace of mind.
None of my clients (barring a few) knew about the catastrophe.
My family was not impacted by the hit. My lifestyle did not change – thanks to a pretty Spartan lifestyle always.
My retirement got postponed.
However, you can rise from the ashes – may not be like a phoenix, but rise you can.
Important:
If 35 years from the incident God lets you laugh at the incident, you have made it. I should thank God, my family, and clients – not necessarily in that order.
