Rs 414 Crore Paid To 34,497 Karvy Clients From NSE's Investor Protection Fund

The government on Monday said Rs 414.24 crore has been paid to a total of 34,497 clients of Karvy Stock Broking Ltd from the National Stock Exchange's investor protection fund till March 2023.

In addition, the NSE, along with other market infrastructure institutions, has also monetised the mutual fund distribution business of Karvy Stock Broking, and funds amounting to Rs 150 crore have been realised, and the same is being utilised for distribution to clients of Karvy Stock Broking, Minister of State for Finance Pankaj Chaudhary said in a written reply to the Lok Sabha.

The case pertains to Karvy unauthorisedly transferring securities of its clients into one of its demat accounts by misusing the power of attorney given to its clients.

NSE and BSE suspended the trading terminals of Karvy Stock Broking from Dec. 2, 2019 and declared it a defaulter on November 23, 2020, for misusing clients' funds and securities.

Moreover, the NSE has declared 32 stock brokers defaulters in the past five years for failing to comply with the bourse's guidelines.

The minister said capital markets regulator SEBI, along with exchanges, conducts regular inspections of brokers based on certain criteria and takes action as per its regulations and bye-laws of the exchanges.

Under NSE guidelines, stock brokers are required to fulfil their obligations and should not engage in any misconduct or unprofessional conduct, among others.

"The claims of investors in the matter are being dealt with and settled by the NSE as per its bylaws." As of March 20, 2023, an amount of Rs 414.24 crore has been paid to 34,497 clients from the Investor Protection Fund of the NSE," Chaudhary said.

Also, the minister said securities worth around Rs 2,000 crore and belonging to 82,559 clients were transferred to fully paid-up clients of Karvy Stock Broking, citing SEBI orders passed in November 2019 and November 2020.

Further, based on the findings of a forensic audit report and the observations of the NSE, SEBI initiated enforcement action against Karvy Stock Broking, its directors, its CEO, and two group companies of Karvy Stock Broking under its relevant regulations.