NSE declares Karvy Stock Broking as defaulter, expels from membership

The National Stock Exchange (NSE) has expelled tainted member, Karvy Stock Broking Ltd from its membership and also declared it a defaulter.

In a circular, NSE says, "...the member has been expelled from the membership of the Exchange under Rules 1 and 2 of the NSEIL Rules and has been declared as defaulter under provision 1(a) of chapter XII of Exchange bye laws from 23 November 2020 after close of marker hours.

A major scam had erupted in November last year after it surfaced that Karvy had transferred securities worth Rs 2,300 crore of more than 95,000 clients, into its account by misusing the power of attorney (PoA) of the clients.

Subsequently, there was change in regulations to fix this loophole where such securities could be misused by the brokers.

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.

An investigation found that Karvy had pledged shares belonging to clients and utilised them to raise funds. Some of these funds were transferred to group companies such as Karvy Realty Ltd.

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."

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