SEBI cancels Certificate of Registration of Karvy Stock Broking

Mumbai, May 31, 2023

Synopsis
A month ago, the Securities and Exchange Board of India had banned the brokerage from the securities market for misappropriating clients' funds. The company was declared a defaulter and expelled by the stock exchanges in November.

The Securities and Exchange Board of India (SEBI) has cancelled the Certificate of Registration of Karvy Stock Broking, a month after it banned the brokerage from the securities market for misappropriating clients' funds.

“Irrespective of the cancellation of the Certificate of Registration, the Noticee (Karvy) shall continue to be liable for anything done or omitted to be done as a Stock Broker and continue to be responsible for payment of outstanding fees and dues, if any, payable to SEBI,” Whole Time Member Ashwani Bhatia said in his order.

A stock broker plays a critical role in the securities market as it acts as an interface for retail investors and is, therefore, required to maintain high standards of integrity and fairness in the conduct of its business dealings and uphold the trust of investors.

Karvy Broking was declared a defaulter and expelled by the stock exchanges in November.

“Given the above, I am inclined to accept the recommendation in the DA report that the Certificate of Registration granted to the Noticee (Karvy Broking) be cancelled,” Bhatia said.

Last month, SEBI barred Karvy Stock Broking and its promoter Comandur Parthasarathy from the securities market for 7 years and imposed a penalty of Rs 21 crore on them for misappropriating clients' funds by misusing the Power of Attorney given to it.

Further, the funds raised by pledging clients' securities were siphoned off by the brokerage to its group firms, Karvy Realty (India) Ltd and Karvy Capital Ltd, the market regulator said in its final order.

The regulator directed Karvy Realty and Karvy Capital to return Rs 1,442.95 crore transferred to them by the brokerage house. They have been asked to return the funds to Karvy Stock Broking within 3 months, failing which, NSE will take control of assets of the two firms to recover the money.

The Karvy Broking scam dated back in 2019, was one of the biggest in the Indian market and since then, SEBI has taken several steps and strengthened the regulatory framework to safeguard investors’ funds.

[The Economic Times]