Karvy tests investor nerves
Karvy group has said there has been no mis-utilisation of its customers’ shares
- Published 26.11.19, 12:04 AM
- Updated 26.11.19, 12:04 AM
- a min read
The Sebi ban on Karvy Stock Broking from taking new clients has led to questions of whether more brokerages will come under the market regulator’s glare. Last Friday, Sebi had passed an ex-parte ad-interim order, prohibiting Karvy from taking on new clients with respect to its stock market activities.
The Karvy group has, however, said there has been no mis-utilisation of its customers’ shares.
Sebi had also said that “in order to prevent further misuse of clients’ securities by Karvy’’, it was directing NSDL and CDSL not to act upon any instructions given by Karvy in pursuance of the power of attorney from its clients, with immediate effect.
A power of attorney gives the authority to another person or entity to operate an account under a given set of instructions.
A preliminary inspection report from the NSE, which was submitted to Sebi, had observed that Karvy had misused the power of attorney given by its clients and sold client securities in the market in a “disguised manner through its own controlled entities and had used the funds for its own purposes’’.
While Sebi has given Karvy 21 days to respond, the Karvy group said it will be providing a detailed explanation and clarification to the market regulator.
“There is no instance where there has been mis-utilisation of client securities. The (Sebi) order gives us the right to respond to each and every preliminary observation within a period of 21 days and is thus only a temporary order restraining some actions till December 16, when we will place our position,’’ the group said.
It added that the only stricture that has been passed is a temporary hold on inducting new clients for 21 days, subject to submission of clarification to Sebi, apart from additional oversight and monitoring by the NSE and the BSE.
C. Parthasarathy, chairman of Karvy Group, has told news publications that Karvy owes Rs 25-30 crore worth of dues to less than 200 clients, which will be cleared over the next few days. Sebi, however, had put the figure at Rs 2,000 crore.