Lok Sabha Question No. 2112 (UNSTARRED), answered on 2021-03-08
Subject: Karvy Stock Broking Fraud
Ministry: FINANCE
Asked by: Ramdas Chandrabhanji Tadas, Sangamlal Kadedin Gupta, Bholanath (B.P. Saroj), Upendra Singh Rawat

## GOVERNMENT  OF INDIA MINISTRY  OF FINANCE DEPARTMENT OF ECONOMIC  AFFAIRS

## TO BE ANSWERED ON 8rH MARCH  , 2021t PHALGUN  A 17, 1942 (SAKA)

## LOaK SABHA UNSTARRED QUESTION No. 2112 KARVY STOCK BROKING FRAUD

21'12: SHRI RAMDAS C. TADAS SHRI SANGAM LAL GUPTA sHRr BHOLANATH  (8.P. SAROJ)

SHRI UPENDRA SINGH RAWAT

Willthe  Minister  of FINANCE be pleased  to state:

- (a) whether the Government /Securities  and Exchange Board of lndia (SEBI) are aware about the Karvy scam of Rs. 2500 Crore and if so, the reaction of Government  /SEBI in this regard;
- (b) whether  the GovernmenUSEBl  have received  many complaints against M/s Karvy Stock Broking Pvt. Limited regarding alleged illegal transfer of shares in beneficiary accounts and non-transfer of money to actual  beneficiary after the death of the shareholder and if so, the details thereof;
- (c) whether  the Government/SEB| are taking any steps to conduct  an investigation  against the illegal operations  of M/s Karvy Stock Broking  Pvt. Limited and take appropriate  action against them; and (d) if so, the details thereof along with the plans of SEBI against NSE Management  and Karvy lt/anagement  and if not, the reasons  therefor?

## ANSWER

## SHRI ANURAG SINGH THAKUR

## MINISTER OF STATE FOR F!NANCE

(a) Yes Sir,

During  the inspection of Karvy Stock Broking Pvt. Limited (KSBL), it was observed that Securities worth Rs.2300 crore (approximately)  of more than 95,000 clients were pledged with banks/  NonBanking Financial  Companies (NBFCS).

SEBI passed an Ex-parte-Ad-lnterim order in the matter of KSBL on 22nd November, 2019. Pursuant to this order, securities  belonging to 82,559 clients of worlh Rs.2000 crores  (approximately)  were transferred  to respective  fully paid-up  clients of KSBL. The interim order was confirmed  by SEBI vide order dated 24th November,2020.  National Stock Exchange  (NSE) declared KSBL a defaulter  on 23'd November,  2O2O and initiated claims  as per the bye laws of the exchange.

During  the period 22nd November,2019to22nd  November,  2020, funds of 2,32,323 clients aggregating to Rs.125.20  crore and securities of 1,57,769  clients aggregating to Rs.2345.82 crore were settled. Further, as on 19th February,2021,  an amount of Rs.81 crore has been paid to 3398 clients from lnvestor Protection  Fund (lPF) of NSE as per the bye laws of the exchange.

- (b) Yes Sir,

Complaints have been received  against KSBL with respect to non-receipt  of payment  of funds / delivery  of shares.  Some of the complaints  have been found to be in the nature where illegal transfer of shares in beneficiary accounts and non-transfer of money to actual beneficiary after the death of the shareholder is alleged.  All such complaints  have been forwarded to NSE for resolution.

- (c) Yes Sir,
- (d) SEBI passed Ex-parte-Ad-lnterim  order in the matter of KSBL on22nd  November, 2019. The interim  order was confirmed by SEBI vide order dated 24th November,2020.

SEBI has initiated proceedings against NSE in the matter of KSBL for violating provisions of SEBI Circulars  pertaining  to monitoring of brokers and oversight  of members.

Further,  SEBI has already initiated  the action  against the Directors  and Key Management Personnel (KMP)  of KSBL as perthe provisions of SEBI Act, 1992, Securities Contract Regulation  Act, 1956, SEBI (Prohibition  of Fraudulent  and Unfair Trade  Practices relating to Securities  Market) Regulations, 2003 and SEBI (Stock Brokers) Regulation  ,1992.