The National Stock Exchange (NSE) has expelled Karvy Stock Broking Ltd from its membership and also declared it a defaulter. This comes after a scam was unearthed last year where Karvy misused the power of attorney given to it by clients and transferred securities worth Rs 2,300 crore into its account and used to for its other businesses such as Karvy Realty. An investigation found that Karvy had pledged shares belonging to clients and utilised them to raise funds.
In a circular, NSE said, â€śAll members are hereby informed that the following trading member has been expelled from the membership of the Exchange under Rules 1 and 2 of Chapter IV of the NSEIL Rules and has been declared as defaulter under provision 1 (a) of Chapter XII of Exchange Bye laws w.e.f. November 23, 2020, after close of market hours.â€ť
Markets regulator Securities Exchange Board of India too, found Karvy guilty of misusing the PoA given by clients. SEBI had barred Karvy from taking new clients in respect of its stock broking activities and also prevented it from using the PoA given by clients.
The scam also triggered regulatory chages not allowing stockbrokers from misusing client securities.
Following this, NSE suspended Karvy Stock Broking Limited due to non-compliance of regulatory provisions with effect from December 02, 2019. It has suspended Karvyâ€™s license in the capital market, futures and options, currency derivatives, debt, MFSS and commodity derivatives segments.
Earlier, NSE said it has settled claims worth Rs 2,300 crore of 2.35 lakh investors of Karvy Stock Broking. In a statement, NSE said: "While disciplinary proceedings are underway, funds and securities of approximately Rs 2,300 crore belonging to about 2,35,000 investors have been settled so far, with efforts focused on settlement of small investors. Investors with fund balances up to Rs 30,000 due from Karvy Stock Broking have been settled."
Following the scam and suspension of licenses, in January, the Karvy Group restructured its business into two verticals: Financial Services and Non-Financial Services.
The stock broking, wealth management, commodities trading and investment banking among others would come under Financial Services, while Non-Financial services would include data management services, data analytics, market research and allied businesses.
With IANS inputs