HYDERABAD:Capital markets regulator Sebi on Monday barred Karvy Stock Broking Ltd from taking up new primary market assignments, including bidding in IPOs for one year. The order was in a case related to an IPO scam during 2003-05.
Sebi probe had prima facie observed that Karvy Group — comprising KSBL, Karvy Consultants Ltd, Karvy Computershare Pvt Ltd, Karvy Securities Ltd and Karvy Investor Services Ltd — had allegedly assisted, aided and abetted the key operators in cornering the shares issued in the IPOs.
However, Sebi has allowed Karvy from continuing with primary market activities that have been undertaken before today’s order.
It may be noted that in March last year, the regulator had also barred KSBL from taking up new assignment for six months as a stock broker.
“KSBL can not undertake new primary market assignment, including acting as syndicate member or providing syndication services (procuring IPO applications and bidding in IPOs), directly or indirectly, in IPOs for a period of one year,” the order said.
The ruling follows a Securities Appellate Tribunal (SAT) directive, issued in January, where Sebi was asked to pass a fresh order within four months.
SAT’s order came after it was found that the regulator did not permit the brokerage to cross-examine Bharat Overseas Bank’s Ahmedabad Branch Manager Devi Dutt in the case.
It was alleged that the entity played an active role in aiding and abetting key operators in cornering of shares in IPOs of various firms.
In its investigation, Sebi found that many individuals and entities had opened various demat accounts in fictitious/benami names and made large number of applications in the IPOs in the category of retail investors (each of the applications being of small value as to make it eligible for allotment under the retail category).
These key operators were found to have cornered the shares issued in the IPOs by using these fictitious accounts. On allotment of shares under retail category, the same were transferred to demat accounts of the key operators who subsequently transferred the shares in off-market deals to ultimate beneficiaries who were the financiers in the IPOs.
