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What is the Karvy Stock broking fraud?

The NSE (National Stock Exchange) declared Karvy Stock Broking Limited (KSBL) as a defaulter for non-compliance with different regulatory provisions. Along with this, they expelled them from the membership of the exchange. The SEBI (Securities and Exchange Board of India) had banned Karvy from taking on new business for misappropriating securities and money of investors to fund their real estate enterprises, Karvy Realty.

The SEBI had initially estimated that Karvy had transferred around Rs 1096 crore to their real estate business. After this, the NSE said the funds and securities worth Rs 2300 crore from 2.35 lakh investors have been settled. NSE also released a statement regarding their tie-up with other market infrastructure institutions. Under the SEBI’s guidance, they transferred the securities to the respective clients, invoked bank guarantees that were deposited with clearing corporations, and liquidated the securities that Karvy Group companies held.

Brokers must ensure they follow the rules and guidelines set by SEBI to avoid such instances. SEBI plays a crucial role in regulating all the institutions operating in the Indian stock market. They try their best to protect the investor’s interest and aim at developing the capital market after enforcing the regulations and rules.

The SEBI has different powers like:

- Quasi-Judicial:
SEBI has the power to deliver judgements on different frauds and unethical practices in the securities market. They help in maintaining transparency, fairness and accountability in the securities market.

- Quasi-Executive:
SEBI is empowered to apply the regulations and judgements that are made and carry legal action against any violators. They are also authorized to look through the account books and other documents if any regulation violation is recorded.

- Quasi-Legislative:
They reserve the right to frame the rules and regulations for protecting the investors.

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