BSE, NSE scrap Karvy Stock Broking licence

Hyderabad: Less than a fortnight into the exposure of a massive Rs 2,000 crore fraud, domestic bourses, BSE and NSE, on Monday suspended the licence of the city-based Karvy Stock Broking Ltd (KSBL) for non-compliance of regulatory provisions of stock exchanges.

The suspension of licence is effective from December 2, according to a circular of National Stock Exchange (NSE). BSE did likewise and duly suspended KSBL’s licence. These follow the orders issued by market regulator Securities and Exchange Board of India (SEBI) against Karvy Stock Broking firm for misusing funds of its clients.

The suspensions will impact thousands of clients at Karvy Stock Broking Ltd, which has a clientele base of 1.20 lakh, and, on an average, about 25,000 investors’ trade every day.

The stock exchanges clarified that KSBL can square-off open positions in the derivatives segment. Clients need to open a new trading account to take fresh positions in the cash segment.

The latest interim report of NSE alleged that Karvy Stock Broking misused Rs 2,300 crore funds of over 95,000 clients without being authorised to do so.

The latest decision of the bourses created tremors in the stock markets. The suspension of licence is applicable in banning trading in capital markets, currency derivatives, debt markets, MFSS, futures and options (F&O), commodity derivatives and cash segments.

The NSE report further observed that KSBL used its business arms to offload the stocks of clients pledged with it. It had also diverted funds of its clients, added the report.

After Sebi banned it from accepting new clients, Karvy moved SAT. The Securities Appellate Tribunal, in turn, asked Sebi to take a decision on interim relief for allowing Karvy to use power of attorney (PoA).

In pursuance of PoA, depositories were told to deny instructions from Karvy. As a result, transfer of securities from depositories is also not allowed.