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Karvy Stock Broking's trading licence suspended over non-compliance with SEBI norms

BusinessToday.In     December 2, 2019

The license of brokerage firm Karvy Stock Broking Limited (KSBL), a subsidiary of Hyderabad-based firm Karvy Corporate, was suspended by BSE and NSE on Monday due to non-compliance with market regulator Securities and Exchange Board of India (SEBI) norms.

Besides BSE and NSE, Multi Commodity Exchange (MCX) and Metropolitan Stock Exchange of India Limited (MSE) also suspended the trading licence for all segments of the brokerage firm, on back of non-compliance of the regulatory provisions of the exchange.

According to the interim order by SEBI, KSBL has been restricted from accepting new clients. However, it can render services to its existing clients. The regulator had further directed the exchanges to initiate disciplinary proceedings against the firm.

Karvy mess: How to curb misuse of client securities and fix loopholes

Besides barring the firm from taking on new clients, SEBI has limited its use of Power of Attorney (POA) for its existing clients, for the limited purpose of transfer of securities to the pool account from Demat accounts for settling clients' pay-in obligations to the exchanges.

As per the circular published by SEBI, clients of KSBL who seek to sell securities through KSBL may do so by using electronic or physical Delivery Instruction Slip (DIS) only.

The market regulator has additionally directed the depositories namely CSDL and NSDL to monitor the movement of securities in order to ensure that the client operations are not affected.

Karvy pledged clients securities to raise Rs 600 crore

This action taken by the exchanges follows the SEBI order, which in its preliminary findings had held that the brokerage firm had misused client securities and sold client stocks pledged with it through associated entities, leading to the diversion of funds.

The securities worth Rs. 2300 crore (approx) of more than 95,000 clients, were unauthorizedly transferred into this account by KSBL, by misusing the PoA given by its clients, the filing added later.

Sebi bars Karvy Broking for client defaults worth Rs 2,000 crore

According to the recent SEBI order on KSBL, the brokerage firm has 900 offices (including franchise) across India, engaging 12 lakh clients, out of which 3 lakh clients were active clients. Of this, 2,000 to 2,500 client transactions result in delivery.

(By Rupa Burman Roy)

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