Karvy Stock Broking refutes claims it has defaulted on Rs 2,000 cr loans; says owes around Rs 50 cr to clients: Report

In a latest development, Karvy Stock Broking Ltd (KSBL) has denied having defaulted on loans. A top official told Business Standard, the broking firm owes Rs 40-50 crore to its clients and the money will be repaid over the due course. The brokerage refuted claims that it has defaulted on loans worth Rs 2,000 crore.

“We don’t know from where this Rs 2,000 crore figure has come. I would like to say all the securities are intact. All these will be credited into regular accounts. So investors don’t have to worry as to what will happen to their securities. There is no default in this particular case. The SEBI order says that the securities have not been dealt with properly,” said the official, the report said.

After a major scandal hit the stock markets with the brazen modus operandi of misusing clients’’ funds, the Securities and Exchange Board of India (SEBI) has banned Karvy Stock Broking (KSBL) from taking new client and executing trades, an IANS report said.

On Friday, NSE forwarded a preliminary report to SEBI on the non-compliances observed with respect to the pledging/misuse of client securities by KSBL.

The exchange’s preliminary report is the result of the limited purpose inspection of KSBL conducted by it on 19 August, covering a period from 1 January onwards, SEBI said in an order.

In a 12-page ex-parte interim order, SEBI Whole Time Member Ananta Barua said there is a “need for urgent regulatory intervention to prevent further misuse of clients’ securities”.

Apart from prohibiting the entity from taking new clients in respect of its stockbroking activities, the watchdog directed NSDL and CDSL not to act upon any instruction given by KSBL in pursuance of power of attorney given by its clients.

“The depositories shall monitor the movement of securities into and from the DP account of clients of KSBL as DP to ensure that clients’ operations are not affected,” the order said.

Further, the regulator said the depositories and stock exchanges shall initiate appropriate disciplinary regulatory proceedings against KSBL for misuse of clients’ funds and securities as per their respective regulations.

The findings recorded in the order are based on the prima facie examination of facts and prima facie violation of securities law, it added.

SEBI also said the “order does not ipso facto entitle any client of the noticee (KSBL) to claim their funds, stocks and securities, which claims are to be taken by such clients with the concerned stock exchanges/ depositories in accordance with their respective bye-laws”.

The directions would be in place pending forensic audit.

KSBL has been given 21 days’ time from the date of receiving the order to file its objections or responses, if any.

--With inputs from agencies