Almost 83k recover their shares

Partha Sinha and Swati Bharadwaj | TNN

Mumbai/Hyderabad: under pressure from the markets regulator Sebi , the National Stock Exchange ( NSE ) and the National Securities Depository (NSDL) have transferred securities worth approximately Rs.300 billion, belonging to almost 83,000 clients of Karvy Stock Broking , from the company's demat account to that of the investors. With this step, the regulator avoided a possible crisis of the PMC Bank type, the suspension of the cooperative bank based in Maharashtra that shook the country's financial system three months ago.

According to an NSE investigation of Karvy In the intermediation books, for several months, the company had transferred these values ​​to its own demat account without the knowledge of its clients and then committed them to banks and financial institutions to raise funds, a large part of which was injected into the real estate arm of the group.

NSDL said in a statement on Monday that the securities of 82,559 clients, who have paid in full for these securities, were transferred from the broker’s demat account into that of the clients. For the regulator, the logic was that Karvy Stock Broking was never the legal owner of these stocks, but had illegally transferred and pledged them. By this move, unprecedented in the history of India, the actual ownership has been established. These stocks were pledged to six bank accounts: Two of HDFC Bank and one of each ICICI Bank , Bank axis , Kotak Bank and IndusInd Bank .

“According to the Sebi directions and under supervision of NSE , securities have been transferred from the demat account IN300394-11458979 named Karvy Stock Broking (BSE) to the demat accounts of the respective clients who have paid in full against these securities,” the statement from NSDL said.

The Sebi order of November 29 had mentioned that shares of over 95,000 clients of Karvy Stock Broking were misused by the broker. So shares of about 13,000 clients, where legal rights are still to be clearly established, have been put on hold, sources said. Most of these investors traded infrequently. According to data released by NSE , as of October end, Karvy Stock Broking had nearly 2.5 lakh investors, making it the sixth-largest stock broker in the country in terms of number of clients.