Sebi junks Axis Bank plea to access pledged Karvy shares
NEW DELHI: Markets regulator Sebi has rejected Axis Bank’s plea to allow the lender to invoke the pledge on shares in the Karvy Stock Broking Ltd matter.
The order comes after the Securities Appellate Tribunal (SAT) on December 20 asked Sebi to pass an order by January 15, 2020 in the case. The tribunal had modified its earlier directive passed on December 17, wherein it had asked the markets watchdog to pass an order within 15 days in the case.
Axis Bank had moved SAT seeking that the shares pledged by Karvy to the lender be unfrozen, so that it can invoke the pledges. The move had come following a Sebi directive to the National Securities Depository Ltd (NSDL) in November that prevented Axis Bank from accessing the securities pledged with the lender by Karvy.
Karvy owed ₹81 crore to the bank which was given in the form of overdraft against shares.
As per NSE data, securities pledged by Karvy in favour of Axis Bank belonged to its fully paid as well as partly or unpaid clients. The value of securities belonging to fully paid client is ₹171.74 crore and the value of securities of other than fully paid clients is ₹13.69 crore. Regarding pledging of securities of fully paid clients, Sebi said a stock broker has no authority to pledge the securities of its fully paid clients. If a broker pledges securities of its fully paid clients, it amounts to misappropriation of clients’ securities. “Even if securities belonging to fully paid clients are pledged by the stock broker, such pledge does not pass any title to the pledgee, as the stock broker in such case himself/itself does not possess any title/right over such securities. Thus, pledge of securities, belonging to fully paid client, is not treated as valid pledge in law,” Sebi noted.
“Pledging of securities of unpaid clients required taking of ‘explicit authorization’ by the stock broker from each such client and in respect of each such pledging. The Representor (Axis Bank) has submitted that the POA (power of attorney) given by the client was sufficient authorization to create such a pledge. However, I do not agree with such interpretation given to the scope of POA (power of attorney),” SEBI whole time member Anant Barua said in an order on Tuesday.
Sebi, through an interim order passed on November 22, barred Karvy from taking new brokerage clients and also prevented it from using the Poas given by its clients after the brokerage was found to have allegedly misused clients’ securities to the tune of over ₹2,000 crore.
Securities held by Karvy were used by the brokerage for borrowing from the lenders courtesy the POA.
The securities held by over 83,000 clients were given back to them after Sebi asked NSDL to do so, forcing lenders to move SAT.
NEW DELHI : The Union budget for FY21 could see higher fund allocation for small and medium businesses currently battling a demand slowdown and liquidity crunch.
The micro, small and medium enterprises (MSME) ministry has sought a 71% increase over and above the budgetary allocation made last year, MSME minister Nitin Gadkari said.
“We have sought ₹12,000 crore budgetary allocation for MSMES in the upcoming Union Budget,” the MSME minister told Mint. The allocation for the sector in the current financial year is ₹7,011 crore.
Gadkari’s statement comes at an important time. MSMES are considered key drivers of job creation and economic growth in developing nations—a significant constituency as India attempts to revive economic growth that hit a six-year low of 4.5% in the July-september quarter.
MSMES account for about 45% of manufacturing output, more than 40% of exports, over 28% of gross domestic product (GDP) and employ about 111 million people. Politically, they are an important support base for the ruling BJP. There are as many as 63.38 million MSMES in India—all firms with physical capital valued at less than ₹10 crore.