The Karvy scam has made mutual fund (MF) investors a worried lot as Karvy Fintech provides registrar and transfer agency (RTA) services to many fund houses such as Axis MF, LIC MF, Principal MF, Nippon MF (Reliance), Sundaram MF, Tata MF, UTI MF etc. Moreover, Karvy also provides distributor services to all asset management companies (AMC). So, not only investors of these fund houses, but investors, who have invested in MF schemes of other AMCs through Karvy, are also worried.
However, investors need not worry, as the structure of the fund houses is so foolproof that it doesn’t allow money or MF units to get diverted. While MF schemes are managed by the AMCs, the money paid by investors to purchase MF units goes directly to the bank account of that particular fund and in case of redemption, money moves out from the bank account of the fund and transferred to the bank account of the investor.
So, even if the investments are made through the distributorship of Karvy, money would move to and fro between the investors’ bank account and the bank account of the respective MF schemes, in which investments are made.
Not only money, even MF units cannot be reallocated to any intermediary and only assigned to the investors at the time of investment and gets back to the AMC at the time of redemption.
One may also gets worried about willful mishandling of investment papers by Karvy as the RTA, but points to be noted that the scam took place in Karvy Stock Broking, which is not in the RTA business. Although, it was a part of Karvy group, but the RTA is provided by Karvy Fintech that is not involved in the scam and which is no longer with the Karvy group.
US-based company General Atlantic has acquired 83.25 per cent shares in the Karvy Fintech and the process of name change would take place soon. So, the Karvy group is no longer even controls the company that is involved in the RTA business and hence would not get entangled into the scam investigation process.