The Telegraph
Since 1st March, 1999
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Sebi climbdown on Karvy

Mumbai, May 26: The Securities and Exchange Board of India (Sebi) today permitted Karvy Stockbroking Ltd (KSBL) to continue providing services to its existing demat customers pending an enquiry into a litany of charges arising from the so-called IPO scam where unscrupulous elements opened fictitious accounts and cornered shares of companies that raised money from the capital markets for the first time.

Modifying his order of April 28, G. Anantharaman, whole-time member of Sebi who is investigating the scam, said KSBL could serve its existing clientele but would not be allowed to take on any new customers.

In April, Anantharaman had virtually hurled the book at the Hyderabad-based Karvy group by ordering it to close its demat services, halt proprietary trades in securities, and refrain from taking on fresh assignments as a registrar to an issue or a share transfer agent.

At that time, Karvy had been ordered to stop providing demat services to its customers within 15 days ' against which it obtained a stay from the vacation judge of Andhra Pradesh High Court.

The revised order issued by Sebi today said KSBL would have to transfer the demat account of an existing client to another Sebi-registered depository participant (DP) if it received such a request.

While continuing to bar KSBL from making proprietary trades in securities either on or off market, it said Karvy Consultants (KCPL) would be allowed to act as a registrar and transfer agent to mutual funds. However, KCPL cannot take on fresh assignments as a share registrar or share transfer agent.

The revision of the order follows an oral submission made by officials of the Karvy group to Sebi on May 9.

“We have got a breather. We will not lose seven-and-a-half lakh DP customers and can continue with the registry of new funds in the mutual fund segment. But the sad part is that we still cannot open new DP accounts nor can we act as registrars for new IPOs. But I am sure we will be able to convince Sebi to eventually allow us to do that as well,” said a Karvy spokesperson.

Sebi also let off two other entities implicated in the scam: Magnum Equity Services Ltd (MESL) and Jhaveri Securities Private Ltd (JSPL). JSPL will not be allowed to open fresh demat accounts but its broking operation will be allowed to deal in the securities market, including IPOs.

In the 40-page revised order on the Karvy group, Anantharaman went into a long quibble to justify the actions he had taken against the group ' thought to be one of the nerve centres behind the scam ' and also asserted his right to issue the directives in the name of Sebi.

While making its legal challenge, the Karvy group had questioned Anantharaman’s authority to issue the sweeping order.

Smart recovery

Shrugging off the recent volatility, stock markets today posted smart gains on the back of the news that monsoon has hit Kerala six days in advance.

The 30-share BSE sensex surged in opening trade and continued its way up and rose as much as 384.45 points to a high of 11,050.77 in mid-morning trade today.

Asian stocks, which were continuously losing ground, edged higher today mirroring Thursday’s gains on Wall Street.

The Indian market, however, pared gains in late trading session and the sensex ended the day with a gain of 143.03 points or 1.3 per cent to settle at 10809.35. Nifty advanced 31.90 points or 1 per cent to settle at 3209.60.

The volume on the Bombay Stock Exchange, however, remained low for the second day in a row with a turnover of Rs 3,158 crore. On Thursday, it had clocked a turnover of Rs 3,030 crore. The first three trading sessions of this week saw a turnover between Rs 3,747 crore and Rs 3,990 crore.

The total market turnover was at Rs 33,712.59 crore against Rs 56,867.82 crore yesterday.

The market breadth was strong with 1,744 stocks advancing against 624 stocks that declined.

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