What SEBI did to avoid cases like Karvy


As the saying goes, mutual funds are subject to market, or systematic, risk. Because the market cannot be accurately predicted or completely controlled, no investment is risk-free.

From the experience of 2019, there had been a set back by the investors. But Sebi is constantly working with an objective to regulate stock markets but also to protect the interest of investors. It promotes the development of the securities market and regulates the business.

 One of the cases was Karvy. The action in the case follows a crackdown by SEBI, which came to light after Karvy started defaulting on client payouts. After a preliminary investigation by the National Stock Exchange (NSE) showed the brokerage pledged and sold some of its client securities to raise funds for its own use, without client authorization and in violation of new rule.

On December 2, suspended Karvy’s trading license with immediate effect. SEBI barred Karvy from taking on fresh clients and executing trades of existing ones, shares of a few customers were routed to its real estate business.

SEBI has been keeping a close eye on all the process and firms to avoid such cases. Recently Sebi has proposed that the indirect routes and the use of pooled accounts be stopped. Money and units should flow directly from the investor to the AMC and both entities must have clear visibility of the other in their accounts.

This was one of the measures taken by sebi to make sure there are no other cases. Karvy’s case has bought another 35 brokers in sebi’s radar. Further, it made it clear that distributors were not expected to handle clients’ funds and securities.

Dhanveda by Confluex


Also read: Will Robo-Advisors dominate 2020 financial landscape?

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