NSE pays Rs 2,300cr to Karvy investors

TNN
Mumbai: The National Stock Exchange (NSE) on Tuesday said that about 2.35 lakh investors who had stocks and money stuck with Karvy Stock Broking for over a year have been paid a combined Rs 2,300 crore as part of their settlement. All those Karvy Stock Broking customers who had outstanding of up to Rs 30,000 received their dues.
This has been completed “under the guidance of Sebi” by transferring securities to respective clients, by invoking bank guarantees deposited with clearing corporations and by liquidating securities held by Karvy group companies, a statement by an NSE spokesperson noted.
Since December 2019, Karvy Stock Broking’s trading terminals on NSE and BSE were closed under Sebi orders, which had left a large number of the brokers’ clients without any access to funds, securities or both, which were in the custody of the broker then. The focus was mainly on the settlement of small investors. “Investors with fund balances up to Rs 30,000 due from Karvy Stock Broking have been settled,” the NSE statement said.
In August 2019, NSE had conducted an audit of the trading books of Karvy Stock Broking, which revealed that for years the broker has been diverting clients’ money to fund some of the group’s other businesses. The audit also found that Karvy Stock Broking was borrowing money by illegally pledging its clients’ securities with lenders.
Part of those illegally pledged securities were taken over by NSE under Sebi’s directions and returned to the rightful owners. The current payment of funds and securities to Karvy Stock Broking’s clients is part of the same settlement process that was initiated last year.
In between, as a fallout of the Karvy scam, the management of Karvy Fintech, which serviced several mutual funds, was changed with the company being rechristened KFintech. The Karvy group had also pledged its corporate headquarters to borrow money to settle its dues.