SEBI bans Karvy Stock Broking and promoter for 7 years, fined Rs 21 crore

Karvy Scam: Taking strict action in the case related to the Karvy Demat scam, market regulator SEBI gave its verdict. SEBI has banned Karvy Stock Broking Limited (KSBL) and its promoters Komandur Parthasarathy for 7 years. Along with this, a hefty fine of Rs 21 crore has also been imposed on him for misleading the customers. Out of this, a fine of Rs 13 crore will have to be paid to Karvy Broking and a fine of Rs 8 crore to promoter Parthasarathy.

refund order

Along with this, the market regulator has also ordered both KSBL’s subsidiaries Karvy Realty India Limited and Karvy Capital Limited to return an amount of Rs 1,442.95 crore. It is worth noting that these companies got profit through demat account scam. If both these companies fail to return the amount, then SEBI will auction the property of both of them by confiscating them from NSE and recover their money. Significantly, the Karvy stock broking scam took place between FY 2017 and 2020.

Officials were also fined heavily

While SEBI has imposed a fine of Rs 13 crore on Karvy Stock Broking for flouting regulations, a total fine of Rs 8 crore has been imposed on MD and promoter Parthasarathy of this company. Along with this, the broking company and Parthasarathy have also been banned from the stock market for 7 years. Along with this, the market regulator has also imposed a fine of Rs 5 lakh each on the independent directors of the company, Bhagwan Das Narang and Jyoti Prasad. Along with this, it has also been ordered that these two persons cannot hold important positions in any listed company in any market for the next two years. Reprimanding the company’s CEO Rajeev Ranjan Sind for negligence, SEBI has barred him from taking up any post in any listed company for the next two years. He has also been asked to stay away from the stock market for two years.

What was the Karvy scam?

Significantly, the Karvy Demat scam was done in the financial year 2017 to 2020 when the brokerage firm took loans from banks and NBFCs by pledging the money of its customers. The banks that took loans included banks and NBFCs like HDFC Bank, IndusInd Bank, Axis Bank, Aditya Birla and Bajaj Finance. SEBI found in this case that till September 2009, Karvy took loans of Rs 2,032.67 crore from banks against total assets of Rs 2,700 crore. Karvy had pledged at least 75 per cent of its total shares for the loan. After this scam came to the fore, many questions of SEBI were raised.

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