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MF houses say investors served by Karvy arm safe

TNN | Nov 26, 2019, 04.00 AM IST

MUMBAI: Mutual fund houses serviced by Karvy Fintech, a Karvy group

company, are preparing to reach out to their investors to assure them
about the safety of their investments with the respective fund houses.
The move comes despite the recent Sebi ban on Karvy Stock Broking,
another group company, from taking new clients due to alleged misuse
of clients’ funds and securities.

Fund houses told TOI that the custody of funds, stocks, bonds, etc, that
the MF houses have bought for their investors are with Sebi-registered
custodians while Karvy Fintech, which serves fund houses, only does
the back office work related to investments.

Karvy Fintech, the register and transfer agent (RTA), lists 23 fund houses among its clients, which include industry biggies
like Nippon Life MF (formerly Reliance MF), UTIMF and Axis MF. It also lists Franklin Templeton MF, but a top official from
the fund house said it has an in-house RTA and Karvy Fintech does not serve its clients.

For example, for Nippon Life MF, Deutsche Bank is the custodian that takes care of all stocks, bonds, etc, for the fund
house’s investors, while Stock Holding Corp of India is the custodian for UTIMF.

Several people on Twitter were asking if their MF investments were safe and whether they should withdraw their entire
holding. Most fund houses plan to point out to investors that since November 2018, Karvy Fintech is majority owned by
global private equity major General Atlantic which has three members on its board. “Except for the name, which is a legacy
since once it was part of the Karvy Group, it’s a different entity,” a top official at a leading fund house said. However, Karvy
group lists Karvy Fintech as a group company on its website.

Another fund official said, “They (Karvy Fintech and KSBL) are separate structurally and functionally. Different boards run
the two companies. The RTA business is Sebi-registered and subject to a high degree of scrutiny of the regulator and
oversight by the fund house.”

“All our transactions are concurrently audited by our implant team. Unlike broking companies, RTAs do not get customer
authorisation or a power of attorney to deal with money. In case of fund houses, money and investment parts are handled
by the fund houses,” the official said.

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