Karvy is banned by SEBI for 2000 crore default

I have recently opened a Demat acin Karvvy. Will I be able to transact or not from Monday?

That’s definitely one of the largest default cases by stock brokers till date. Well lets see what happens next.

Mom have almost 10 thousands shares in karvy demat, don’t know what’s gonna with them. Thinking to transfer and divide these to two brokers, zerodha and finvasia.

https://www.livemint.com/market/stock-market-ne...
► Sebi observed that all the pledged shares came from client accounts and the lenders did not exercise proper ‘due-diligence’
► The market regulator also found the lenders lapsing as they merely relied on Karvy’s assertions that the pledged shares belonged to the broking firm

The Securities and Exchange Board of India (Sebi) on Friday refused to give any relief to the four lenders -Bajaj Finance Ltd, ICICI Bank, HDFC Bank, IndusInd Bank – of Karvy Stock Broking Ltd. The lenders had lost control over pledged shares after they were transferred by National Securities Depository Ltd (NSDL) into clients’ accounts.
Soon after the transfer, the lenders on 2 December had moved Securities Appellate Tribunal (SAT) seeking reversal of the share transfer. SAT while calling reversal ‘untenable’ had referred the matter to Sebi to consider lenders plea.
In its Friday order, Sebi observed that all the pledged shares came from client accounts and the lenders did not exercise proper ‘due-diligence’. While extending loan against shares (LAS) the banks failed to notice that the bulk of pledged shares did not come from ‘proprietary account’ but from ‘non-house’ account.
The market regulator also found the lenders lapsing as they merely relied on Karvy’s assertions that the pledged shares belonged to the broking firm.
The four lenders including Bajaj Finance, ICICI Bank, HDFC Bank, IndusInd Bank had extended ₹345 crore, ₹642 crore, ₹208 crore and *+₹159*+ crore to the broking firm against pledge shares worth ₹2873 crore as of 16 September 2019. These pledged shares came down to ₹2319 crore in November 2019.
The matter pertains to a 22 November Sebi order where it had barred Karvy from acquiring new clients and acting/ trading on behalf of the clients. The market regulator held that Karvy had misused client securities by pledging them with various lenders without authorization.
These securities were used to raise funds from banks, some of the securities were sold off and the proceeds were transferred to its real estate arm – Karvy Realty Ltd.
“The securities worth around ₹2300 crore of more than 95,000 clients, were unauthorizedly transferred into this account by KSBL to generate funds for its own/group entities use," said NSE in the interim report, which formed the basis of subsequent Sebi order.
Interestingly, Sebi observed that broking firm in its financial statements had disclosed that it held only ₹27.79 lakh of securities in its own account.
“A prudent lender always refers to balance sheet for ascertaining the financial position and solvency of the borrower and also the purpose of loan, before lending," said Anant Barua, Whole Time Member at Sebi.
Sebi in its 20 June circular had sought cessation of using client securities by brokers for funding purposes directly impacted the business activity of lenders.
“Therefore, all pledgees were required to take appropriate action to comply with the circular," said Sebi.
“The issue whether lenders have exercised proper due diligence or has complied with applicable laws pertaining to loans against shares, can be looked into by the concerned regulator, if so deemed fit," the market regulator added.

From: https://www.livemint.com/market/stock-market-ne...