Karvy Scam: What Lies Ahead For Investors?

Soon after its exposure, NSE issued guidelines for investors urging them to take precaution

- Vishav

Just over a month ago, in November, one of the oldest and reputed financial services company and stockbroking firm that catered to lakhs of customers across the country was forced to cease operations almost immediately. The reason – it misused the Power of Attorney (PoA) given to it by the investors and transferred the shares from the investors’ account to another account and then pledged ₹2,300 crore worth of shares of over 95,000 clients as collateral to get loans from banks and NBFCs by pretending that the shares belonged to the company.

Following the unravelling of the fraud, both Bombay Stock Exchange (BSE) and National Stock Exchange of India (NSE) suspended the trading license of Karvy while Sebi issued an order preventing the firm from adding new customers and barring it from exercising the PoA given by its customers.

Investors are yet to recover from the shock and are concerned about their investments. And not just those who invested with Karvy but others are also asking questions if their broker could also do something like this. What should they do to safeguard their investments, they ask.

Some experts believe that the immediate aftermath of the crisis is that the investor community is in shock and a shadow of doubt is cast on the stockbroking community in which everyone is being perceived with suspicion.

Rahul Agarwal, Director, Wealth Discovery/EZ Wealth, while speaking to Outlook Money says that the Karvy crisis should remind investors about the flaws in the stockbroking industry and hence take preventive measures. “Karvy is not the only one which may be involved in such kind of malpractices. Therefore, investors are well-advised to take a series of steps to protect their investments,” he further adds.