InvestorQ : What does it mean when the reports say that 90% of the customers of Karvy have got back their shares? How can that happen if the shares were already sold?
rhea Babu made post

What does it mean when the reports say that 90% of the customers of Karvy have got back their shares? How can that happen if the shares were already sold?

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Rutuja Nigam answered.
2 years ago
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Actually it is quite simple. You must be aware that on 02 December morning, NSE and BSE suspended the trading membership of Karvy Stock Broking effective. This would mean that customers of Karvy cannot place any buy or sell orders in cash / F&O / CD / IRFs. Existing open positions in F&O and CD will be allowed to be squared off while customers of Karvy will have to shift their trading accounts to another broker to be able to execute fresh orders.

Now the next thing that SEBI did was to ask NSDL and CDSL to check the trail of these shares and wherever such transfers had been made from the pool account into the account of Karvy Realty or had been pledged to the bank, such trades were simply annulled under instructions by SEBI. This meant that in nearly 90% of the cases, SEBI ensured that the shares went into the demat accounts of the rightful owner. The pending cases balance 10% were the cases of investors who had some dues to Karvy and once these dues were paid up, even they would get their shares into the demat account. Now traders and investors will be able to transfer shares to another DP without any hassles.

The only question is what happens to the banks and NBFCs that have lent to Karvy against these pledged shares. In such cases, since the shares were fraudulently transferred by Karvy, they have declared null and void and such loans will now become unsecured loans. Of course, the banks can now initiate court proceedings to recover their dues from Karvy. The regulator has certainly ensured that small investors are not put to trouble due to this scam at Karvy.

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