NEW DELHI : Following the Karvy Stock Broking scandal, the National Stock Exchange (NSE) issued a notice to investors on how to protect their stocks. The exchange asked investors to ensure that they receive payments within the day and that funds and securities do not sit idle with the securities broker.
Here is the full review:
1) Ensure that the remittance of funds/securities is received in your account within one business day of the remittance date.
2) Be careful when executing the PoA (Power of Attorney) – specify all the rights that the securities broker can exercise and the time period for which the PoA is valid. It can be noted that PoA is not a mandatory requirement according to SEBI/Exchanges.
3) Sign up for online applications, namely Speed-e and Easiest provided by custodians for online delivery of securities as an alternative to PoA.
4) Make sure you receive contract memos within 24 hours of your trades and account statement at least quarterly from your stockbroker.
5) Please note that securities you provide to margin cannot be pledged by your stockbroker to raise funds.
6) If you have opted for a current account, please ensure that the securities broker settles your account regularly and in any case no later than 90 days (or 30 days if you have opted for 30-day settlement).
seven) Do not keep unused funds and securities with the broker.
8) Log in to your account regularly to check balances and verify the accuracy of the account statement received from custodians.
9) Check the messages sent by the exchanges on a monthly basis regarding the balances of funds and securities reported by the trading member and report a concern immediately if you notice any discrepancy.
ten) Always keep your contact details i.e. mobile number / email id updated with the stockbroker. You can raise the issue with Stock Broker/Exchange if you are not receiving messages from Exchange/Depositories regularly.
11) If you observe any discrepancies in your account or settlements, contact your stockbroker immediately and, if the stockbroker does not respond, the Exchange/Depositories.
Since Monday, the NSE and the BSE have suspended Karvy for non-compliance with regulatory provisions.
Last month, the Securities and Exchange Board of India (Sebi) banned Karvy from taking on new brokerage clients and also barred him from using power of attorney (PoA). SEBI had discovered that the Hyderabad-based brokerage firm had misused clients’ securities and funneled them for other purposes.
The market regulator had banned the brokerage firm from taking new clients on board and also ordered exchanges to initiate disciplinary proceedings against the firm.
Karvy has taken out loans up to ₹600 crore by pledging securities worth more than ₹2,300 crores from 95,000 customers with lenders. Among them, almost 90% of the clients recovered their titles, which were illegally transferred by the Karvy to its own account.
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