The National Stock Exchange (NSE) and BSE have suspended the membership of Karvy Stock Broking (KSB) with immediate effect for non­compliance with exchange regulations. This comes close on the heels of regulator SEBI barring the Hyderabad­ based entity from signing new clients, for alleged misuse of client funds. While NSE has suspended Karvy Stock Broking from all segments, BSE said that the trading terminals of KSB had been deactivated in the equity and debt segment, while it had been put on risk reduction mode (RRM) in the derivatives segment.

RRM refers to the mode wherein a member is allowed to square off the position but cannot create any fresh positions. This assumes significance as the suspension of membership effectively means that clients of Karvy Stock Broking will not be able to trade through the brokerage and will have to shift their holdings to a different broking firm.“Investors need to open

new trading account and shift their demat holdings to another entity,” said Arun Kejriwal of Kejriwal Research & Investment Services.“While the exchanges have taken action and suspended trading, it appears justice has not yet been done. Wrongdoings on the part of Karvy Stock Broking seem to be going on for quite some time and trust that has been lost is irreparable. Much more action is required by the exchanges and regulator going forward,” he

added. However, KSB clients had something to cheer about as well on Monday as the National Securities Depository Ltd. (NSDL) said that securities of more than 82,000 clients of the broking

firm had been transferred to the respective demat accounts of the clients. This covers a bulk of the affected demat accounts.“As per the directions of SEBI and under supervision of NSE, securities have been transferred from the demat account named Karvy Stock Broking Limited (BSE) to the demat accounts of respective clients who have paid in full against these securities. The number of such clients who have received securities are 82,559,” stated a release by NSDL on Monday.

Answer the following questions from the above passage-

Q1. Why the membership of Karvy Stock Broking (KSB) was suspended by NSE and BSE? 

Q2. What are the segments from where KSB was suspended?

Q3. What is risk reduction mode(RRM)? 

Q4. What was National Securities Depository Ltd. (NSDL) said about the KSB clients? 

Q5. What was the meaning of suspension of membership?