SEBI cancels Karvy Stock Broking’s registration for 'misappropriating' clients’ funds.

Securities and Exchange Board of India (SEBI) on Wednesday said that it has cancelled the registration of brokerage firm Karvy Stock Broking Ltd (KSBL) for mis-utilising clients funds and securities.

SEBI stated that Karvy was involved in transferring of funds from clients' account to own accounts. These funds were later transferred to the group companies of the brokerage house.

As per the order of SEBI, Karvy was raising loans from financial institutions by pledging shares of its clients as collateral A total of Rs 2,032.67 crore was raised as loan and the value of securities pledged by the stock broker was Rs 2,700 crore during the period.

The brokerage firm did not settle clients’ funds and securities as well, SEBI said in its order. It failed to furnish details of the bank account and depository participant accounts. It also failed to cooperate with the forensic auditor in the proper assessment of the assets and liabilities of the member towards the client.

Back in November 2019, SEBI had banned Karvy from taking any new client after the regulator found that the firm had allegedly misused clients fund and securities worth Rs 2,000 crore. The interim order came after NSE sent a preliminary report to SEBI on non-compliance observed with respect to pledging or misuse of clients’ securities by Karvy Stock Broking.

SEBI has also cancelled “the certificate of registration of Karvy Stock Broking Ltd” under the intermediaries’ regulations, noting that Karvy has been declared a defaulter. The brokerage firm was also expelled by BSE and NSE in November 2020.

SEBI had last month banned Karvy and its promoter Commander Parthasarathy from the securities market for seven years and imposed a penalty of Rs 21 crore on them for misappropriating clients’ funds, by misusing the Power of Attorney given to the company.

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