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

Market regulator Sebi on Friday banned Karvy Stock Broking (KSBL) for client defaults worth around Rs 2,000 crore. This order will come into force with immediate effect.

According to the Sebi order, brokerage firm Karvy has been prohibited from taking new clients and existing customers in respect of its stock broking activities.

"The present order has been passed under disciplinary proceedings against Karvy for the prima facie violations of the securities laws," the market regulator said.

"The regulator has directed the depositories (NSDL and CDSL) to prevent further misuse of clients' securities by KSBL, and asked them to not act upon any instruction given by KSBL, with immediate effect".

KSBL may file its objections, within 21 days from the date of receipt of this Order.

A recent inspection by National Stock Exchange revealed that KSBL sold excess securities to the tune of Rs 485 crore through 9 related clients till May 31, 2019. Further, KSBL also transferred excess securities to 6 out of these 9 related clients to the tune of Rs 162 crore till May 31, 2019, Sebi said in its report.

"On subsequent verification, it was observed that securities worth Rs 257.08 crore, pledged on behalf of 4 clients out of the aforesaid 9 clients, were unpledged during June 1, 2019 to August 22, 2019 and securities worth of Rs 217.85 Crores were recovered by KSBL from 4 out of the said 9 client accounts," it said.

KSBL has transferred securities worth Rs 27.8 crore, off-market, from the beneficial owner accounts of 156 clients who have not executed a single trade with them. Further, securities worth Rs 116.3 crore were observed to have been transferred from 291 clients who have not traded with KSBL since June 01, 2019, Sebi noted.

Edited by Chitranjan Kumar