NSE and BSE suspend Karvy Stock Broking’s license over non-compliance
03/12/2019
Mumbai: In what could mean curtains for the Hyderabad-based financial services major Karvy group's broking business, stock exchanges on Monday suspended their license for non-compliance.
"The National Stock Exchange (NSE) has suspended Karvy Stock Broking (KSBL) due to non-compliance of the regulatory provisions of the exchange with effect from December 02, 2019," the exchange said in a circular.
Following NSE's action, BSE too suspended the brokerage.
"Trading members of the exchange are hereby informed that pursuant to NSE Circular No.62/2019 dated December 2, 2019 informing that they have suspended Karvy Stock Broking Ltd. w.e.f. December 2, 2019 due to non-compliance of the regulatory provisions of the Exchange, BSE has deactivated trading terminals of the Trading Member, Karvy Stock Broking Ltd. (Clg. No. 917) in Equity segment & Debt segment and put them in RRM mode in Equity Derivatives, Currency Derivatives and Commodity segment w.e.f. December 2, 2019," BSE said in a circular.
The move by the exchanges follows market regulator Securities and Exchange Board of India's (Sebi) order against KSBL for alleged misuse of client funds.
Officials at stock exchanges said the clients of KSBL will be allowed to square off their open positions in the derivatives segment. However, to take fresh positions or to buy and sell in the cash segment, clients will have to open a new trading account with a broker.
Suspension of KSBL could impact thousands of clients.
"Karvy has 1.2 million clients, of which 300,000 are active. On an average, 20,000-25,000 clients transact on a daily basis," the brokerage had told SEBI last week. Sources said following SEBI action against the brokerage, exchanges too had initiated proceedings against KSBL which led to suspension.
KSBL couldn't be reached immediately for a comment.
An interim report by NSE alleges securities worth Rs 2,300 crore of more than 95,000 clients were unauthorisedly transferred by KSBL.
EY currently is conducting a forensic audit on the brokerage to ascertain exact misuse and extent of wrongdoing.
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