1. KARVY SCAM
By
Mayank Negi

2. CONTENTS
o About Company
o About Scam
o Actions by SEBI
o How to avoid such scams

3. ABOUT KARVY
• Karvy Group is a financial services company in India. It was involved in financial
services like equity, commodities trading, depository and wealth services and
distribution of other financial products.
• It has its headquarters in Hyderabad.
• Karvy Group was established in the year 1983 and was headed by C.
Parthasarathy as Chairman.
• It also had branch offices outside India in Bahrain, Dubai, Malaysia, the
Philippines and the United States.

4. SUBSIDIARIES OF KARVY
Karvy Private
Wealth
Karvy Global
Services Ltd
Karvy Stock
Broking Ltd
Karvy
Consultants
Park Financial
Advisors Pvt
Ltd

5. ABOUT SCAM
Karvy misused client securities for its own purposes.
The company also illegally transferred client securities to its own account.
Karvy forged client signatures and manipulated client demat accounts to carry out these fraudulent
activities.
Initial estimates showed that KSBL used securities of over 95000 clients illegally.
It led them to raise over Rs. 2300 crore via loan.
HDFC Bank, ICICI Bank, IndusInd Bank, Axis Bank, Bajaj Finance, and Aditya Birla Finance
were the multiple providers of loans.

6. HOW IT WAS INITIATED?
Dormant Account –
A dormant account is a customer's account at a bank or other financial institution that has seen no activity,
with the possible exception of interest deposits, for a long period of time. The owner may have forgotten
about the account, moved out of town without leaving a forwarding address, or died.
Power of Attorney –
The term power of attorney (POA) refers to a legal authorization that gives a designated person the power to
act for someone else. As such, a POA gives the agent or attorney-in-fact the authority to act on behalf of the
principal. The agent may be given broad or limited authority to make decisions about the principal's property,
finances, investments, or medical care.

7. HOW IT CAME TO LIGHT?
• On June 20, 2019, SEBI came out with a circular on
handling clients securities which said that brokers could
not pledge client securities to raise loans.
• Till then it was an established market practice.
• SEBI set up a deadline of 30 – 09 – 2019 for brokers to
segregate clients fund and securities.
• KSBL failed to do it and it was also suspected that they
are still doing such practices.
• Then NSE investigated the matter.

8. ACTION BY SEBI
• SEBI issued an order banning KSBL from broking services on 22 – 11- 2019.
• The firm had transferred Rs 1096 crore to group company Karvy Realty.
• SEBI asked NSE to conduct a detailed forensic audit with depository participants.
• 83000 out of the 95000 clients securities were transferred back after investigation.
• November 2020, NSE said that they had settled claims worth Rs 2300 crore to around 2.4 Lakh investors.
• In 2021 under SEBI directions KSBL’s demat accounts were auctioned off to IIFL Securities.
• And trading accounts were auctioned off to Axis Securities.

9. HOW TO AVOID SUCH SCAMS?
• Check NSDL Statement every month.
• Don’t let your account become a dormant account.
• Opt for those brokers who have fewer complaints.
• Understand the pros and cons of giving power of attorney.
• Avoid using brokers who demand POA.