Lost money in Karvy Stock Broking scam? Hurry Up, deadline is approaching

Karvy Stock Broking Ltd. was declared a defaulter by NSE on November 23, 2020.

Market regulator Securities and Exchange Board of India (SEBI) has advised investors who lost money in the Karvy episode to file claims with the NSE.

"As the deadline for submitting investors’ claims against defaulting broker Karvy Stock Broking Ltd. is approaching shortly, investors are advised to take note of the above deadline and are urged to file their claims before the deadline, if not lodged already,” SEBI said in a press release issued Friday.

“As per NSE bye-laws, rules and regulations, claims against the defaulting broker were invited from investors and deadline for submitting such investors’ claims was fixed as June 02, 2025,” the regulator stated.

Investors are entitled to claim losses from the exchange’s investor protection fund trust, subject to fulfilling all the criteria and documentation if a broker defaults.

The NSE’s investor protection fund trust allows a maximum claim of Rs 35 lakh per investor if the broker defaults or is expelled by the exchange. However, the enhanced claim limit will be against brokers that have been declared defaulter or have been expelled post-August 13, 2024.

Karvy Stock Broking Ltd. was declared a defaulter by the NSE on November 23, 2020. As per NSE bye-laws, rules, and regulations, claims against the defaulting broker were invited from investors, and the deadline for submitting such investors’ claims was fixed as June 2, 2025.

The NSE has a corpus of Rs 2,494 as on April 30.

The BSE has a limit of Rs 16 lakh in case of a default by the broker or expulsion of the broker by the exchange. Investors are compensated from the exchange where the trade has taken place.

Exchanges compensate only in case if the assets of the defaulting broker are not enough to meet the admitted claims.

Investors in case of any queries, are advised to contact NSE on its toll-free number - 1800 266 0050 (Select IVR option 5) or write to defaultisc@nse.co.in.

The Karvy Stock Broking scam came to light in November 2019 after an inspection of the company’s inspection in August 2019. Various irregularities were found after a thorough probe, including pledging shares of clients as collateral and borrowing loans on these shares, and diverting them to other entities.

SEBI found that the value of securities pledged increased from Rs 202 crore on June 30, 2017, to Rs 1,855 crore by March 2018 and had further increased to Rs 2,700 crore by September 2019, before the company started facing liquidity issues.

Karvy Stock broking scam led to massive overhauling of regulations by SEBI, including change in share pledge system, faster settlement, direct pay out of securities to clients account, upstreaming of funds to clearing corporation etc.