Sebi has barred Karvy Stock Broking Ltd (KSBL) from taking up new assignment or launching new schemes for six months in its capacity as a stock broker. KSBL came under the Sebi scanner for alleged irregularities in the 2003-2005 IPO scam.
The order will come into effect after 4 weeks from the date of its receipt by KSBL, as per a direction of Securities Appellate Tribunal.
In its 35-page order, Sebi observed KSBL played an active role in aiding and abetting key operators in their devious scheme of cornering of shares. The case relates to an alleged nexus Karvy had with some key operators in facilitating their game plan of cornering of shares in the various IPOs, which were meant for the retail category and the sale of those shares.
The investigations prima facie observed that the Karvy Group -- comprising KSBL, Karvy Consultants Ltd, Karvy Computershare Pvt Ltd -- had allegedly assisted, aided and abetted the key operators in cornering the shares issued in the IPOs.
These three entities, appealed before the SAT, which asked Sebi in June 2008 to pass three separate orders against them, while giving them a four-week time for orders to come into effect.
According to Sebi, KSBL failed to maintain integrity, indulged in manipulation and malpractices violating the code of conduct specified in its Broker Regulations.
In his order dated March 14, Sebi’s Whole Time Member Prashant Saran said, “I note that while the Enquiry Officer has exonerated KSBL from the charge that it is not a fit and proper entity, the Enquiry Officer has recommended that the certificate of registration of the notice as a stock broker be suspended for three months.
During the hearing, KSBL submitted that the alleged irregularities occurred in its Ahmedabad Office and there were no findings in respect of other branches and that all their other branches had been conducting their business in compliance with the rules, and therefore any restraint on the entire operations would not be proper.