Mumbai, April 28: One day after it issued a sweeping order, the Securities and Exchange Board of India (Sebi) made a volte face and stayed the ban on Indiabulls Securities after a hearing with the brokerage.
The market regulator also issued a clarification that retail investors of the brokerages that had been barred from dealing in the securities market could continue to make transactions. However, clients of Karvy and Pratik depository participants will be allowed to continue transactions for only 15 days by when they should seek out new DPs.
Although the two measures cheered Indiabulls Securities (ISL) and scores of retail investors who can now continue with their transactions, it did leave the market regulator in a defensive position. Questions are now being asked as to why the clarification was not issued in its ex-parte interim order on Thursday.
The order had not only precipitated a near 500-point drop in the BSE sensex at the start of trading on Friday, but had also left many investors in an anxious state of mind.
“It certainly is a good decision for the retail investor. But the key question is that had this clarification come yesterday, many investors would not have been left worried,” said an observer.
The market regulator had yesterday barred 24 entities from buying, selling or dealing in the securities market, including in IPOs directly or indirectly.
Sebi, in a clarification issued today, said, if the broker in question is a Sebi-registered intermediary, the directions (in the interim order of April 27) not to buy, sell or deal in the securities market, including in IPOs, would apply only to transactions in the proprietary account of the broker and transactions on behalf of clients would remain unaffected.
The same clarifications apply to DP operations wherever they are depository participants.”
The stricture against clients of Karvy and Pratik has left retail investors somewhat unhappy with many fearing that they would not be able to open alternative accounts fast enough to continue trading.
Amid these developments, Indiabulls got a major reprieve when the market regulator kept its order, barring the brokerage from buying, selling or dealing in the securities market, either directly or indirectly, in abeyance. This came after Sameer Gehlaut, chairman of Indiabulls Securities, appeared before G. Anantharaman, whole-time member of Sebi, who had issued the interim order yesterday.
While the regulator did not elaborate the grounds that led to such a decision, Indiabulls Financial Services Ltd informed stock exchanges that Indiabulls Securities appeared before Anantharaman to make oral and written submissions regarding receipt of 13,939 shares of Tata Consultancy Services after its IPO from 559 different accounts.
Indiabulls said the 559 account holders who transferred the 13,939 TCS shares to Indiabulls Securities Ltd, transferred the shares in the client margin account of ISL for their trading purposes towards meeting their margin requirements according to the stock exchange rules and regulations.
“Indiabulls Securities Ltd accepted these shares in its client margin account in its capacity as a broker and for the limited purpose of facilitating the client transactions.
“According to the rules, a broker cannot trade on behalf of a client without receiving margin from the client either in the form of cash or shares. On sale of the TCS shares by the 559 clients, the proceeds of the sales were transferred by Indiabulls Securities to the same individual client accounts who had transferred these shares to Indiabulls client margin account for meeting margin requirements,” it said.