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.
By Nirbhay Kumar
New Delhi, Dec 16 (IANS) Fast-moving consumer goods (FMCG) firms have topped the list of customers complaints list for over-charging ever since the new indirect tax regime Goods and Services Tax (GST) was rolled out on July 1, 2017.
Restaurateurs came second, followed by entertainment and media firms.
As per official data, as many as 42 consumer complaints were registered against various FMCG companies with many of them found to be not passing the benefits of lower tax rates.
As GST rates were cut across various categories in the GST Council meetings to reduce tax incidence on consumers, the companies were expected to pass on the benefit by lowering prices in proportion to the rate reduction.
It was, however, found that many companies had not passed on the benefit of lower tax and indulged in profiteering. Complaints were later filed against them and the GST anti-profiteering watchdog National Anti-profiteering Authority (NAA) took up the cases.
Some of the FMCG majors like Hindustan Unilever Ltd (HUL), Procter & Gamble India (P&G) and Nestle were found to have profiteered from the lower tax regime.
In the latest case, the NAA last week ordered Nestle to deposit Rs 73.15 crore with Consumer Welfare Fund for not passing GST rate reduction benefit to consumers. The FMCG major has, however, said that it will consider appropriate action after studying the same.
Experts said that it is very difficult for FMCG companies to assess the exact impact of the lower tax given that they have multiple similar products in one category.
Moreover, they sell products for as low as Rs 2 for a shampoo pouch and when the rate is lowered they are not in the position to exactly assess the impact on price. Even if the assessment is done and it is found that the price should be lower by 30 paise, transaction becomes difficult as currency of that amount is not available.
"Because of multiple products of similar kind it is difficult for FMCG companies to arrive at a particular price. There are very small units like toffee selling for Re 1. In this case it will be very difficult to arrive at net impact of rate cut," said Amit Bhagat, Partner, Dhruva Advisors.
Besides FMCG, many restaurants are also facing complaints with 14 cases being lodged. Two complaints were filed against sanitary ware firms. Media and entertainment firms have six complaints against them.
(Nirbhay Kumar can be contacted at firstname.lastname@example.org)