Karvy Stock Broking Limited’s 95,000 customers are staring at uncertainty as they wait to regain the shares and receive payments from the brokerage firms.
Clients can usually change their broker by opening an account with a competitor’s brokerage company. By obtaining a client master report and initiating a case settlement and transfer request, some customers of Karvy claim that the company intentionally delayed payment. Also, prevented them from moving to another brokerage company. Karvy did not transfer the shares from the consolidated account to DP Holdings. An anonymous investor said, only when the transfers are done, the people can continue trading. The payment request has not been honored, and also the securities purchased will not be on Demat in the account. Several other investors who spoke to Mint said that several complaints against Karvy had been filed, and the further action is awaited. SEBI, on Nov. 22, barred the company from accepting new customers and trading on behalf of existing investors. However, the law did not restrict the company from making timely payments. It is said that the most problematic transactions could create obstacles for investors, including those who sold their shares worth Rs 10.96 crore. These transactions are the focus of EY India Ltd’s forensic audit.
Karvy promised to investors that it would pay the refunds as soon as possible. A spokesperson for Karvy, in an email response, said that the company would pay INR 25 million to 200 customers under SEBI’s rules, and the payment would be made within two weeks. However, the Karvy Group faces liquidity issues, which may make it challenging to meet its payment obligations. The company’s liquidity problems began with the commodity brokerage business in the third week of November, when the company delayed payments to certain customers by ten days or more. Rating agencies Crisil Ltd. and Icra Ltd. have downgraded stockbrokers and banking facilities in their group operations. Under recent SEBI’s interim orders, Icra downgraded the ratings of two tools from Karvy Stock Broking on Wednesday. Meanwhile, the brokerage company filed an appeal against SEBI’s interim directive in the Securities Appeals Court.