New Delhi, June 15 (PTI): Sebi today barred Karvy Stock Broking from taking up new primary market assignments for one year, including bidding in initial share sales, in a case related to an IPO scam in the 2003-05 period.

However, Sebi has allowed the entity to continue with primary market activities that had been undertaken before today's order.

It was alleged that the entity played an active role in aiding and abetting key operators in cornering of shares in the initial public offers of various firms.

In an order, Sebi directed "Karvy not to undertake new primary market assignments, including acting as syndicate member or providing syndication services (procuring IPO applications and bidding in IPOs), directly or indirectly, in IPOs for a period of one year."

The ruling follows a Securities Appellate Tribunal (SAT) direction, issued in January this year, where Sebi was asked to pass a fresh order within four months. In March 2014, the regulator had barred Karvy Stock Broking from taking up new assignments for six months as a stock broker.

SAT's order came after it was found that the regulator did not permit the brokerage to cross-examine Bharat Overseas Bank's Ahmedabad branch manager Devi Dutt in the case.

In its investigations into the IPO scam, Sebi found that many individuals and entities had opened various demat accounts in fictitious/benami names and made large number of applications in the IPOs in the category of retail investors (each of the applications being of small value as to make it eligible for allotment under the retail category).

These key operators were found to have cornered the shares issued in the IPOs by using these fictitious accounts.

Profit route

On the allotment of shares under the retail category, the same were transferred to the demat accounts of the key operators who subsequently transferred the shares in off-market deals to ultimate beneficiaries who were the financiers in the IPOs.

The probe had prima facie observed that Karvy Group - comprising KSBL, Karvy Consultants Limited, Karvy Computershare Private Limited, Karvy Securities and Karvy Investor Services Limited - had allegedly assisted, aided and abetted the key operators in cornering the shares issued in the IPOs.