IIFL Securities all set to acquire Karvy Stock Broking demat accounts

IIFL Securities Ltd has emerged as the successful bidder for demat accounts held by Karvy Stock Broking Ltd with NSDL and CDSL. At the same time, Axis Securities Ltd has emerged as the successful bidder for broking accounts held by Karvy with the NSE, the BSE, and the MSE.

In November 2019, the market regulator Securities and Exchange Board of India had barred Karvy from taking new brokerage clients after it was found that the brokerage firm had allegedly misused clients' securities to the tune of more than ₹2,000 crore.

Karvy - a defaulter

The firm misused client collateral for its own trades. Later, SEBI also directed depository participants to transfer shares pledged by Karvy to be retuned to more than 80,000 clients even when their was a lien on them in favour of few banks who had lent money to Karvy worth several hundred crores.

Then in November 2020, The National Stock Exchange had declared Karvy Stock Broking as a defaulter for non-compliance with the regulatory provisions of the bourse.

The NSE, BSE, and Metropolitan Stock Exchange (MSE) issued circular, on February 6, 2021, to transfer the trading, as well as, the demat accounts held by Karvy to another member through a formal bidding process.

“In the process, Axis Securities Ltd. has emerged as the successful bidder for trading accounts (broking accounts) held by Karvy with NSE, BSE, and MSE.

The said transfer of Trading accounts is subject to the remittance of the bid amount and submission of the necessary documents in relation thereto. Once the process is complete, the customer base of Axis Securities will surge from 2.5 million to over 3.6 million.” Axis said in a statement.

“As the details are awaited, this transfer will help broking clients of Karvy to continue access to the securities market,” it added.

Asset base of ₹3.01 lakh crore

While IIFL Securities has won the bid to acquire nearly 11 lakh demat accounts, Axis Securities will get the same number of trading accounts.

This is the first time stock exchanges and depositories have decided to sell the assets of a stockbroker to settle the dues of broker’s clients.

Karvy has 3.83 lakh accounts with CDSL and 7.23 lakh on the NSDL. According to the release, Karvy Stock Broking's demat accounts with CDSL and NSDL have assets under management of around ₹3.01 lakh crore. Of that, CDSL holds just at ₹17,574, while NSDL has assets woth ₹2.84 lakh crore.