Zee Business IMPACT! SEBI bans Karvy Stock Broking from adding new clients post Rs 2,000 crore default
Zee Business impact: The Security Exchange Board of India (Sebi) has imposed a ban on Karvy Stock Broking (KSBL) from adding any new client. Karvy Stock Broking has been banned by SEBI for client defaults worth around Rs 2,000 crore making.
Zee Business impact: The Security Exchange Board of India (Sebi) has imposed a ban on Karvy Stock Broking (KSBL) from adding any new client. Karvy Stock Broking has been banned by SEBI for client defaults worth around Rs 2,000 crore making. Reportedly, this is one of the largest cases of equity broker default. As per the ex-parte interim order by SEBI, Karvy has been banned from having any new clients and executing current trades. This follows constant spotlighting of case by Zee Business.
Zee Business Managing Editor, Anil Singhvi said, ''We had been constantly keeping our close watch on Karvy Stock Broking for the last three weeks. We also wrote two e-mails to the broking company, seeking a response from the company about the problems being faced by customers. However, the company persistently denied the reports quoting that the problems are already resolved. However, we were regularly getting complaints on our Twitter page, which made us raise this issue in the SEBI press conference. The impact was loud and clear and it provoked the investigation by the authorities.''
The investigation by National Stock Exchange (NSE) revealed that Karvy Stock Broking (KSBL) transferred a net amount Rs 1,096 crore to its group company Karvy Realty between April 2016 and October 2019. KSBL had sold pledged client shares via off-market transfer as its own in five out of nine client accounts amounting to Rs. 228.07 crore in 2019 and transferred stocks worth Rs. 27.8 crore from 156 clients who have not executed a single trade with them.
Now, Sebi is mulling whether brokers can be barred from offering clearing and settlement services. The board has been prompt in raising these issues after Karvy Stock Broking had allegedly sold client stocks pledged to it for loans.
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SEBI said, "Considering the issue of misuse of clients' securities by KSBL in an unauthorized manner, for its own use and purposely not disclosing the DP account no. 11458979, named KARVY STOCK BROKING LTD (BSE) to the Exchanges in their reporting creates a serious doubt on the conduct and integrity of KSBL.''
The inspection by NSE revealed that the stocks worth Rs 116.3 crore were transferred from 291 clients who have not traded with KSBL since June 2019. KSBL had sold excess securities (not available in DP account) to the tune of Rs. 485 crore through nine related clients. The company had also transferred excess securities to six out of these nine related clients to the tune of Rs. 162 crore till May 2019. Stocks worth Rs 257.08 crore, pledged on behalf of four clients were un-pledged between June and August 2019 and securities worth of Rs 217.85 crores were recovered by KSBL from four out of the said nine client accounts. KSBL has also purchased securities in five out of the respective nine client accounts amounting to Rs. 228.07 crore in 2019.
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