Karvy Stock Broking Barred by SEBI after NSE Report on Illegal Transactions
Karvy Stock Broking has been barred by SEBI from signing up new clients and the exchanges have been ordered to not honor the transactions sent by Karvy Stock Broking. The issue came up after NSE noticed that Karvy Stock Broking was engaged in illegal transactions. The company has allegedly transferred some client shares to its own entity. And, then Karvy availed a loan on these securities. The loan money was offered to real estate arm of Karvy. However, all these are allegations. SEBI order has been issued as interim ex-parte order.
Karvy hasn’t been heard in this case till now. SEBI will give time to Karvy to explain its actions. However, this is a major blow to Karvy Stock Broking. It will be very difficult for the company to gain back consumer trust. The order was passed by SEBI on November 22.
Karvy Stock Broking has nearly 2.44 lakh clients. Most of the clients will consider moving to other broking houses. As per initial reports, clients will be able to transfer their stocks to other demat accounts. And, consumers of Karvy should withdraw their funds right now, to be safe.
As per SEBI order, a net amount of ₹1096 crores was transferred by Karvy Stock Broking to its group company, Karvy Realty Private Limited.
Talking about SEBI order, Anubhav Ghosh, Partner, Law Point said, "Sebi directive against Karvy pretty much bars the brokerage firm from executing and settling future trades on clients behalf. Even the trades that were executed on Friday cannot be settled by Karvy and depositories would need to monitor delivery for settlement of those trades."