IIFL Securities set to acquire demat accounts from Karvy Stock Broking

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IIFL Securities Ltd has become the successful bidder for demat accounts held by Karvy Stock Broking Ltd with NSDL and CDSL. At the same time, Axis Securities Ltd became the successful bidder for brokerage accounts held by Karvy with the NSE, BSE and MSE.

In November 2019, market regulator Securities and Exchange Board of India banned Karvy from taking on new brokerage clients after it was discovered that the brokerage company had allegedly misused clients’ securities to the tune of over ₹2,000 crore.

Karvy – a defaulter

The company abused customer guarantees for its own transactions. SEBI later also ordered depository participants to transfer shares promised by Karvy to be returned to more than 80,000 customers, even when it was a lien on them in favor of a few banks that had lent money. money to Karvy for several hundred crores.

Then in November 2020, the National Stock Exchange declared Karvy Stock Broking in default for non-compliance with stock exchange regulations.

The NSE, the BSE and the Metropolitan Stock Exchange (MSE) issued a circular, on February 6, 2021, to transfer the trading accounts, as well as the demat accounts held by Karvy to another member through a process formal tender.

“In the process, Axis Securities Ltd. became the successful bidder for trading accounts (brokerage accounts) held by Karvy with NSE, BSE and MSE.

The said transfer of trading accounts is subject to the payment of the offer amount and the presentation of the necessary documents in this respect. Once the process is complete, Axis Securities’ customer base will grow from 2.5 million to over 3.6 million. Axis said in a statement.

“While details are awaited, this transfer will help Karvy’s brokerage clients continue to access the securities market,” he added.

Asset base of ₹3.01 lakh crore

While IIFL Securities won the bid to acquire nearly 11 lakh demat accounts, Axis Securities will get the same number of trading accounts.

This is the first time that exchanges and custodians have decided to sell the assets of a stockbroker to settle the dues of the broker’s clients.

Karvy has 3.83 lakh accounts with CDSL and 7.23 lakh on NSDL. According to the release, Karvy Stock Broking’s demat accounts with CDSL and NSDL have assets under management of around ₹3.01 lakh crore. Of this amount, CDSL holds only ₹17,574, while NSDL has assets worth 2.84 lakh crore.

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