NSE Lists Dos And Don’ts To Protect Investors’ Shares Amid Karvy Matter

The National Stock Exchange released an advisory for investors on how to safeguard their shares after investments of 95,000 clients were illegally transferred by a broker to his own account and were pledged without any authorisation.

The recommendations by India’s largest bourse included careful execution of power of attorney, not keeping funds idle with brokers, regularly verifying demat statements and what to do if any discrepancies are noticed, among others.

This stems from the Nov. 22. order by the Securities and Exchange Board of India that barred Karvy Stock Broking Ltd. from taking on new clients and dealing with their money for allegedly selling clients’ securities and using funds for its own purposes.

The market regulator also restrained transfer of securities from Karvy Stock Broking’s depository participation account with immediate effect, except to those beneficial owners who had made full payments for securities. To be sure, 83,000 of such clients recovered their securities.

At the same time ICICI Bank Ltd., HDFC Bank Ltd. and IndusInd Bank Ltd. had contended that many of these securities have been used to borrow money from them and had asked the Securities Appellate Tribunal to either get back the securities to them or freeze them in an escrow account.

The tribunal on Wednesday directed the lenders to approach SEBI in this case, saying the plea is untenable since the transfer was already carried out.

Here’s a list of recommendations issued by the NSE...

• Ensure that payout of funds/securities is received in your account within one working day from the date of payout.
• Be careful while executing the power of attorney — specify all the rights that the stockbroker can exercise and time frame for which power of attorney is valid. It may be noted that power of attorney is not a mandatory requirement as per SEBI/exchanges.
• Register for online applications viz Speed-e and Easiest provided by depositories for online delivery of securities as an alternative to power of attorney.
• Ensure that you receive contract notes within 24 hours of your trades and statement of account at least once in a quarter from your stockbroker.
• Please note that securities provided by you towards margin are not permitted to be pledged by your stockbroker for raising funds.
• If you have opted for running account, please ensure that the stockbroker settles your account regularly and in any case not later than 90 days (or 30 days if you have opted for 30 days settlement).
• Do not keep funds and securities idle with the stockbroker.
• Regularly login into your account to verify balances and verify the demat statement received from depositories for correctness.
• Check messages sent by exchanges on a monthly basis regarding funds and securities balances reported by the trading member and immediately raise a concern if you notice a discrepancy.
• Always keep your contact details viz mobile number/email ID updated with the stockbroker. You may take up the matter with stockbroker/exchange if you are not receiving the messages from exchange/depositories regularly.
• If you observe any discrepancies in your account or settlements, immediately take up the same with your stockbroker and if the stockbroker does not respond, with the exchange/depositories.