Mumbai, Dec 3 (IANS) In a major blow to Karvy Stock Broking Limited, the National Stock Exchange and the BSE on Monday banned the broking firm on account non-compliance of regulations.
Last month, the Securities and Exchange Board of India (SEBI) had banned the brokerage firm from taking new clients and executing trades for its brazen modus operandi of misusing client funds by using their demat accounts.
The prompt action of the market regulator and its effective implementation by the bourses ensured that nearly 83,000 investors got back their securities which were illegally transferred by the firm to its own account and were even pledged for raising loan without the authorisation.
However, the matter once again highlighted that Indian markets are prone to manipulations and stricter and pragmatic regulations are still required for the market players to ensure fair play.
Karvy started its journey as a stock broker way back in 1983 and ever since has managed several large and prominent market offerings besides being a portfolio manager for key clients.
Its long journey at the bourses gave it the reputation of being a smart broker which could help investors grow their wealth. But in the process, the company also got aware of the loopholes in the system and how to use them for its own gains. It is here that the process of illegal transfer of clients' funds by the broker to its own account started.
Like a normal brokerage operation, Karvy took money from clients for any buy order and transferred shares to them upon making payment to the bourses. Similarly, for share sale, the scrip moved from client's demat account to the pool account of the broker from where it was transferred to the exchanges and the money received in return was deposited back into the client's account.
It all seemed fair, till the broker started using client shares received into its pool account for pledging and raising loans. The client shares were then pledged for raising loans without authorisation for personal gains.
Karvy's modus operandi involved transferring of shares from demat accounts of its clients, which were inactive, to demat accounts controlled by the broking house. It then pledged those shares with lenders and raised funds. These funds were transferred to Karvy Realty.
C. Parthasarathy, Chairman and Managing Director of Karvy group and a chartered accountant by qualification, had co-founded Karvy in 1983. Last week he resigned from Karvy Fintech, which acts as a registrar and transfer agent (RTA) for the mutual fund industry. His resignation had come after SEBI barred Karvy from taking fresh clients.
New Delhi, Jan 28 (IANS) Effectively seeking to end the tenure of Securities and Exchange Board of India (SEBI) Chairman Ajay Tyagi, the Finance Ministry has in a quiet move called for applications to fill up the post.
An order dated January 24 has been issued by the Economic Affairs Division of the Finance Ministry titled, "Filling up the Post of Chairman, Securities and Exchange Board of India".
The order invites applications for filling up the post of SEBI Chairman. The Chairman will receive a consolidated pay of Rs 4.5 lakh per annum as recommended by the Seventh Pay Commission, the recommendations of which were accepted by the government in 2016.
The Chairman shall hold office for not more than 5 years and shall not hold office beyond 65 years, whichever is earlier.
Applications are to reach by February 10 with annual confidential reports of five years, integrity certificates, vigilance certificates and no penalty certificates.
It may be pointed out that February 10, 2017 is the date when Tyagi was appointed SEBI Chairman by the Appointments Committee of the Cabinet (ACC) for a five year term. February 10 is also the date when new applications are being invited, exactly three years into Tyagi's term.
At that time, Tyagi was Additional Secretary, Finance Ministry. He is an IAS officer of the 1984 batch of the Himachal Pradesh cadre.
However, soon after his appointment, the government had curtailed his tenure by two years, barely a week after his name was cleared to succeed the incumbent UK Sinha with a five-year term.
Tyagi's term was fixed for an initial period of three years.