IPO scam: Sebi penalises Karvy

Mumbai: In a major order with regard to IPO scam of 2003-2005, Sebi has barred Karvy Stock Broking Ltd (KSBL) from taking up new assignment or launching new schemes for six months in respect of its role as a stock broker.

However, this order would not be given effect for a period of four weeks from the date of its receipt by KSBL, as per a direction of the Securities Appellate Tribunal (SAT). In a case involving large-scale irregularities in as many as 21 IPOs during 2003-2005, Sebi has found that KSBL “failed to maintain high standards of integrity and further indulged in manipulation and malpractices and thereby violated the code of conduct” specified in its Broker Regulations.

The six-month prohibition order would also apply to contract or launch of a new contract by KSBL, while it would also not be allowed to take new clients or customers during this period in respect of its stock brokerage business. In his order dated March 14, Sebi’s Whole Time Member Prashant Saran said, “I note that while the Enquiry Officer has exonerated KSBL from the charge that it is not a fit and proper entity, the Enquiry Officer has recommended that the certificate of registration of the noticee as a stock broker be suspended for a period of three months.

“As stated above, in a case where there has been widespread market abuse, the role of one entity should not be seen in isolation  and that the collective roles and activities of all the entities concerned should be seen,” he said.

During the hearing, KSBL submitted that the alleged irregularities occurred in its Ahmedabad Office and there were no findings in respect of other branches and that all their other branches had been conducting their business in compliance with the rules and regulations laid out.