The Securities and Exchange Board of India (SEBI) has issued a final reminder to investors affected by the Karvy Stock Broking Ltd (KSBL) default, urging them to submit their claims before the 2 June 2025 deadline.
The National Stock Exchange (NSE) had declared KSBL a defaulter on 23 November 2020 following multiple payment failures and regulatory violations. As per NSE bye-laws, investors were subsequently invited to file claims against the defaulting broker. The deadline for doing so was fixed as 2 June 2025.
In a statement released over the weekend, SEBI says, “As the deadline for submitting investors' claims against default broker Karvy Stock Broking is approaching shortly, investors are advised to take note of the above deadline and are urged to file their claims before the deadline, if not lodged already.”
The market regulator’s notice serves as a final call for clients of the now-defunct brokerage to seek redress through the established mechanism. Those who fail to file by the cut-off date may forfeit their eligibility for compensation under the investor protection framework.
Karvy Stock Broking’s downfall began after it was found to have misused client securities worth over Rs2,300 crore by pledging them to raise loans for its own purposes — a violation that led to regulatory crackdowns and its eventual expulsion from NSE membership.
SEBI has repeatedly emphasised the need for investors to remain vigilant about broker operations and to act promptly in the event of default.
Investors who wish to file claims can do so through the NSE’s prescribed process, details of which are available on the Exchange's official website, SEBI says.
In November 2019, Karvy had unauthorisedly transferred securities worth Rs2,300 crore of more than 95,000 clients, into its account, by misusing the power of attorney (PoA) given by its clients.
On 22 November 2019, SEBI barred Karvy from taking new clients in respect of its stock broking activities and also prevented it from using the PoA given by clients after the broker was found to have allegedly misused clients' securities. Karvy had, instead of pledging its own shares, pledged shares belonging to clients and utilised them to raise funds. Some of these funds were, in turn, transferred to its sister concerns such as Karvy Realty Ltd.
The Karvy group, once a prominent player in India's financial market, has faced a series of regulatory challenges over the past few years. In April 2023, SEBI issued an order restraining Karvy Stock Broking Ltd (KSBL), the group's flagship entity, from accessing the securities market for seven years. This action was taken due to KSBL's involvement in misusing the client's funds and securities, including unauthorised transfers and pledging of client securities without consent.
Subsequently, in May 2023, SEBI cancelled KSBL's registration as a stockbroker, further intensifying scrutiny of the group's affiliated entities.
As of August 2024, National Stock Exchange (NSE) has paid Rs1,118 crore towards settling 70,897 claims filed by investor clients of the top-10 defaulting brokers out of its investor protection fund (IPF) trust from 1 January 2019 to 22 August 2024. As expected, investor clients of Karvy Stock Broking Ltd filed the maximum number of claims and received Rs448 crore from the IPF.
Earlier in March this year, Market regulator Securities and Exchange Board of India (SEBI) has cancelled the certificate of registration (CoR) of two entities associated with the Karvy Group—Karvy Capital Alternative Investment Trust (KCAIT) and KCAP Alternative Investment Fund (KCAP AIF).
SEBI's examination revealed that KCL and these AIFs failed to meet the 'fit and proper person' criteria as outlined in SEBI's AIF Regulations, 2012, and the Intermediaries Regulations, 2008. A critical factor in this assessment was KSBL's substantial ownership stake in KCL, which exceeded 20%. Given KSBL's disqualification from the securities market, this ownership was deemed a violation of the 'fit and proper person' standards.
Whilst the fraud was committed thru POA they should have the trail on from whose account these were taken from? why can't the authorities get directly in touch with the persons who were cheated.