BROKING UNDER LENS

Investors spend considerable time comparing the service charges of various brokerages but take safety for granted. While the debate on the cutthroat fee models in stock broking rages, the recent Karvy scam has diverted focus on the vital issue of protection of investors’ funds and securities lying with brokerages.

Investors with Karvy Stock Broking found themselves in a tight spot after the brokerage was hauled up by the Securities and Exchange Board of India (Sebi) for allegedly using clients’ shares to raise funds from some banks and finance companies and transfer that money to some group companies. The market regulator accused it of misusing ₹1,096 crore. The National Stock Exchange suspended its licence early-December. In an interview with BT, C. Parthasarathy, Chairman and MD, Karvy Group, said, “We are of the firm belief that investments made through owned funds of the group and borrowings other than the pledge of securities were fully compliant with the relevant provisions and directives of the regulator during the period that they were made. Further, we wish to reiterate that all monies transferred from time to time were solely for the ongoing conduct of business in subsidiary firms.”

This most recent incident puts a question mark on the credibility of all types of brokerages, be it no-frill discount brokers, or advisoryled