What Investors Need To Know about Filing Claims Regarding Defaulter Brokers: CDSL Explains Issues and Processes
Moneylife Digital Team 10 December 2020
Allaying the panic of investors, Nitin Ambure, vice president, operations at Central Depository Services Ltd (CDSL) explained to investors of Karvy and Anugrah brokerage firms that the depository would be able to provide the trade data and transfers that are required even if the firms were no longer answering queries. 
Recently, Anugrah Stock & Broking Ltd and Karvy Stock Brokers Ltd—a large firm that was suspended a year ago—have been declared defaulters and expelled. Since then, many investors were traumatised by the fact that their requests to transfer their shares to another depository participant (DP) were falling on deaf years, because the expelled brokerages and their staff were in complete disarray and sometimes not even available. 
Moneylife Foundation has been actively hosting webinars with regulatory and legal experts in this regard and one such session was held with Mr Ambure, supported by Farokh Patel, vice president, audit, inspection and compliance at CDSL, patiently took investors through the series of processes that are triggered in the case of a default, including what happens to shares if the investor does not submit a request to transfer to another DP. 
Mr Ambure explained how both stock broking firms failed to meet the prerequisite of being a DP within CDSL, once they were expelled or trading was suspended by the exchanges. 
“As per the bylaws of CDSL, we are responsible to give a 15-day notice to clients of those DPs who are no longer with the CDSL. Thus, allowing clients to transfer any securities to another DP by contacting the respective expelled DP,” said Mr Ambure when asked about the 15-day deadline that was intimated to clients over mail. While the deadline had created panic, he explained that, after that date, CDSL as the depository would take on responsibility to granting permissions, make it easier on the investors. 
Explaining further on how a client can initiate transfer of securities from either Anugrah or Karvy, Mr Ambure said that, “Any client with only one demat account either with Karvy or Anugrah, can easily open another demat account to transfer securities to this new account attached to another DP. The process is very simple and has been explained on the CDSL website. Clients can have access to a list of DPs in their respective regions and can also see their related tariffs, in order to decide which DP is best suited for their purpose.” 
“Also, opening of a new demat account is also very simple and straightforward with only the requirement of a valid ID and address proof, so in a sense clients need not go to a DP’s office to open an account, the entire process can be completed from home,” he says.
During his presentation he also addressed the fact that the client demat accounts in the cases of Anugrah and Karvy which have nil balances will be closed after the 15-day period (after 11 December 2020), since the DP is no longer registered with CDSL and has been suspended on the Exchanges. 
Discussing the present actions that a client of either Anugrah or Karvy needs to undertake, Mr Ambure explained that they would first have to choose another operational DP and initiate transfer of securities within the 15-day notice period by taking up the matter with the concerned DP.
“Beyond the 15-day period, our CDSL bylaws also allow the DP to continue to cater to the needs of the investor in terms of transferring their securities to a new account, so investors need not necessarily worry about missing the deadline. Pursuant to our bylaws, after the 15 day notice period the DPs will also become ‘CDSL managed DPs’, so an investor will have to approach CDSL in order to initiate transfer of their securities,” he further explained. 
After a brief presentation, Mr Ambure and Mr Patel spent some time in answering questions that were collated by Moneylife Foundation from the Telegram groups and shared with them in advance. Although many concerns were addressed during the presentation, Mr Ambure still took the time to painstakingly address and answer all questions from the participants. 
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A video recording of the session is available on our YouTube Channel and can be viewed below:
k p Indrasimhan
4 years ago
What about Nsdl? They have not posted anything on this Karvy situation. Can Moneylife arrange a similar statement from NSDL?
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