Karvy case: SAT stays Sebi order against exchanges
MUMBAI: The Securities Appellate Tribunal (SAT) on Friday stayed the market regulator’s April 12 order against the National Stock Exchange (NSE) and BSE Ltd in a case of alleged lax approach in the Karvy Stock Broking (Karvy) fraud.
The stay is for more than six weeks. In its order the Securities and Exchange Board of India (Sebi) had imposed a penalty of ₹3 crore on BSE and ₹2 crore on NSE for failing to detect misconduct by Karvy.
A bench led by Justice Tarun Agarwala said, “We allow three weeks to NSE (respondent) to file a reply and three weeks thereafter to NSE (appellant) to file its rejoinder in the matter. Considering the facts and circumstances that have been brought on record, we direct that the effect and operation of the impugned orders shall remain stayed till next date of hearing.”
The matter has been listed for admission and final disposal on 12 August. A similar stay was granted to BSE.
The Karvy scam is a case of mis-utilization of client securities worth ₹2,300 crore, which belonged to over 95,000 clients, through unauthorized pledging. These funds were then utilized by the broking firm and its group entities to raise ₹851 crore from eight banks.
In two separate orders, Sebi had determined that the exchanges were lax in catching the brokerage firm. In its order, Sebi stated that the exchanges had previously inspected the broker with a “casual approach.” While making its appeal before the SAT, senior counsel Darius Khambatta appearing for NSE said, “It was NSE who brought the account to the notice of the regulator.”
BSE argued that it had carried out a full-fledged inspection on Karvy for FY 2016-17 and that there was no laxity as far as the exchanges’ approach was concerned.