IIFL Securities wins bid to acquire 11 lakh Karvy accounts
After the acquisition of Karvy accounts, IIFL Securities the combined accounts will become 13.83 lakhs, the 3rd largest broker India after Zerodha, Upstox. IIFL Securities is likely to pay close to Rs 140 crores for the acquisition, as per sources.
For the first time in India, stock exchanges and depositories have decided to sell the assets of a stockbroker to settle the dues of broker’s clients and called for bids.
National Securities Depository Limited (NSDL) after consulting with Central Depository Services and stock exchanges has invited bids last month for selling demat and trading accounts of Karvy Stock Broking.
“The funds raised from the bidding shall be utilized for settlement of claims of investor’s of Karvy, after recovering the outstanding dues of market infrastructure institutions (MIIs),” said NSDL.
Since December 2019, Karvy Stock Broking’s trading terminals on NSE and BSE were closed under Sebi orders, which had left a large number of the brokers’ clients without any access to funds, securities or both, which were in the custody of the broker then. The NSE last year November said that they have paid Rs 2,300 crore to 2.35 lakh investors of Karvy Stock Broking as a part of settlement.
Later market regulator SEBI has asked NSE to increase its Investor Protection Fund (IPF) corpus from Rs 560 crore to Rs. 1,500 crores in order to protect the interests of investors in light of the recent broker defaults. Investors can claim a defaulting trading member subject to a maximum of Rs. 25 lakhs from the stock exchange.
Some of the lenders to Karvy Stock broking approached Sebi demanding the market regulator to pay off their losses from the investor protection fund.
“In mutual consultation with stock exchanges and other depository, it has been decided that the trading as well the demat accounts held by Karvy shall be transferred to another Member through a formal bidding process. Interested Participant(s), having inter alia satisfactory compliance & governance credentials, adequate net worth and nationwide presence shall submit their bids for acquiring the demat accounts,” said a circular by NSDL.
