KARVY STOCK BROKING DECLARED DEFAULTER.
                     KARVY STOCK BROCKING 
DECLARED DEFAULTER
INTRODUCTION
• Karvy Stock Broking has been ruled as 'defaulter' by the National Stock Exchange 
(NSE), opening the way for the beleaguered broking firm's customers to make 
appeals to the exchange to recover their dues. 
Source: www.business-standard.com
INVESTOR PROTECTION FUND
• Once a defaulter is rejected by a trading member, a stock exchange may pay the 
clients from the kitty of the investor protection fund (IPF). 
• It is alleged that the Hyderabad-based company has misused shares belonging to 
its customers. 
Source: www.medium.com
FUNDS AND SECURITIES
• The cumulative default is said to be over Rs 3,000 crore, making this the broker's 
biggest default. 
• NSE, however, settled funds and securities worth Rs 2,300 crore belonging to 
235,000 customers last week.
Source: www.indiatoday.com
DISAGREEMENT OVER SECURITIES
• There is a disagreement over pledged securities between the banks and Karvy. If 
the court rules in favour of Karvy, then the extent of default could be around Rs 
400 crore.
Source: www.business-standard.com
CUSTOMER DUES
• Around 90,000 of Karvy's customers are yet to collect their dues. Of that, 7,000 
have come forward, to say around Rs 230 crore. 
• It is expected that NSE will carry out an advertisement appealing to customers of 
Karvy to make statements, if any. 
Source: www.invoicelyblog.com
BROKER DEFAULTS
• The exchange will pay up to Rs 25 lakh from the IPF per customer, providing that 
certain conditions are fulfilled. 
• Unlike a bank default, where the lender is not compensated by the borrower, 
most broker defaults are due to theft of consumer shares or funds. 
Source: www.business-standard.com
ATTORNEY CONTROL
• Last year when brokers had access to consumer shares via attorney control, more 
of these instances happened. 
• Brokers who defaulted in 2019 promised their customers' shares to collect funds 
for other firms or to provide other customers with a larger trade margin. 
Source: www.business-standard.com
REGULATIONS
• In December 2019, after the Karvy came to light, the Securities and Exchange 
Board of India (Sebi) market regulator put in place regulations that prohibit 
brokers from obtaining access to consumer shares. 
Source: www.business-standard.com
LONG PROCEDURE
• It took about a year for the NSE to declare Karvy a defaulter. Industry players said 
the procedure is reasonably long as the exchange needs to give the broker 
reminders, give it time to make the shortfall fine, and then have an opportunity 
to present its case. 
Source: www.business-standard.com
SECURITIES APPEAL TRIBUNAL (SAT)
• Karvy has the possibility of appealing the move by NSE before the Securities 
Appeal Tribunal (SAT), which is also hearing an appeal by leading banks that have 
lent loans to Karvy.
Source: www.businesstoday.com