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SEBI bans Karvy Stock Broking from new IPO related work for one year

By PTI
15 June, 2015

Sebi today barred Karvy Stock Broking Ltd (KSBL) from taking up new primary market assignments, including bidding in initial share sales, for one year in a case related to IPO scam during 2003-2005 period.

However, Sebi has allowed the entity to continue with primary market activities that have been undertaken before today’s order.

It was alleged that the entity played an active role in aiding and abetting key operators in cornering of shares in IPO’s (Initial Public Offer) of various firms.

In an order, Sebi directed “KSBL not to undertake new primary market assignment including acting as syndicate member or providing syndication services (procuring IPO applications and bidding in IPOs), directly or indirectly, in IPOs for a period of one year.”

The ruling follows a Securities Appellate Tribunal (SAT) direction, issued in January this year, where Sebi was asked to pass a fresh order within four months. In March 2014, the regulator had barred KSBL from taking up new assignment for six months as a stock broker.

SAT’s order came after it was found that the regulator did not permit the brokerage to cross-examine Bharat Overseas Bank’s Ahmedabad Branch Manager Devi Dutt in the case.

In its investigations into IPO scam, Sebi found that many individuals and entities had opened various demat accounts in fictitious/benami names and made large number of applications in the IPOs in the category of retail investors (each of the applications being of small value as to make it eligible for allotment under the retail category).

These key operators were found to have cornered the shares issued in the IPOs by using these fictitious accounts.

On allotment of shares under retail category, the same were transferred to demat accounts of the key operators who subsequently transferred the shares in off-market deals to ultimate beneficiaries who were the financiers in the IPOs.

The probe had prima facie observed that the Karvy Group — comprising KSBL, Karvy Consultants Limited, Karvy Computershare Private Limited, Karvy Securities Ltd and Karvy Investor Services Limited — had allegedly assisted, aided and abetted the key operators in cornering the shares issued in the IPOs.


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SEBI bans Karvy Stock Broking from new IPO related work for one year

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