KARVY’S TRADE LICENCE SUSPENDED
NEW DELHI: Leading stock exchanges BSE and National Stock Exchange (NSE) on Monday suspended Karvy Stock Broking Ltd’s trading licence for all segments due to non-compliance of the regulatory provisions of the bourses.
The move comes after markets regulator Securities and Exchange Board of India (Sebi), through an order passed on November 22, barred Karvy from taking new clients in respect of its stock broking activities and had also prevented it from using the power of attorney (PoA) given by clients after the broker was found to have allegedly misused clients’ securities.
In two separate circulars, the bourses announced that they “have suspended Karvy Stock Broking Ltd with effect from December 2, 2019 due to noncompliance of the regulatory provisions of the exchange”.
BSE said it has deactivated trading terminals of Karvy in equity and debt segment and put them in the risk reduction mode in equity derivatives, currency derivatives and commodity segment.
Sebi’s directive had come after the NSE forwarded a preliminary report to it on the noncompliances observed with respect to pledging/misuse of client securities by Karvy.
The exchange’s preliminary report is the result of the limited purpose inspection of Karvy conducted by it on August 19, covering a period from January 1 onwards, Sebi had said in its order.
Meanwhile, Sebi’s prompt action against Karvy Stock Broking has resulted in nearly 83,000 investors getting back their securities, which were illegally transferred by the broker to its own account and were even pledged without any authorisation.
With the latest transfer by National Securities Depository Ltd (NSDL), nearly 90% investors have got back their securities and the remaining ones will get after clearing their dues.
Karvy has taken loans to the tune of ₹600 crore by pledging securities worth more than ₹2,300 crore of 95,000 clients with lenders.
Of these, 95,000 clients, nearly 83,000 of them have got back their securities, which were were illegally transferred by the KSBL to its own account.
“As per the directions of Sebi and under supervision of NSE, securities have been transferred from the demat account .... named Karvy Stock Broking Ltd to the demat accounts of respective clients who have paid in full against these securities. The number of such clients who have received securities are 82,599,” NSDL said in a circular.
The timely action assumes significance as any any delay could have led to invoking of pledge by lenders with whom the broker had pledged the clients’ securities.
According to market experts, timely action by Sebi has also averted PMC Bank-like situation.