SEBI Orders Karvy Stock Broking To Pay Rs 25 Crore For Misappropriation Of Funds
This action follows their failure to settle a fine previously imposed by SEBI.
Markets regulator SEBI issued a notice to Karvy Stock Broking Ltd. and its CMD C Parthasarathy on Wednesday, demanding payment of approximately Rs 25 crore within 15 days in a case pertaining to misappropriation of clients' funds. This action follows their failure to settle a fine previously imposed by SEBI.
In April 2023, SEBI had barred KSBL and Parthasarathy from the securities market for seven years and imposed a penalty of Rs 21 crore for the misappropriation of clients' funds through misuse of the Power of Attorney granted to the firm.
Individually, the regulator had levied a fine of Rs 13 crore on KSBL and Rs 8 crore on Parthasarathy, promoter-cum-managing director.
In its fresh notice, the regulator has directed KSBL and Parthasarathy to pay Rs 15.21 crore and Rs 9.36 crore, respectively, which includes interest and recovery cost, within 15 days.
In the event of non-payment of dues, the markets regulator will recover the amount by attaching bank accounts, attaching as well as selling the entities' moveable and immoveable property. Besides, Parthasarathy may face 'arrest and detention in prison'.
The case relates to KSBL's massive asset mobilisation drive followed by raising of huge funds from financial institutions by using the securities mobilised from the clients with a promise to pay them interest.
These funds were misappropriated and diverted to KSBL's connected entities, thereby defaulting in its obligations to settle the securities and funds with the clients as per regulatory instructions.
In its order passed in April last year, the regulator found that KSBL was raising funds by pledging clients' securities and by misusing the Power of Attorney granted to it by its clients. Further, the funds by KSBL were being diverted to its group entities thereby violating various provisions of law.
(With Inputs From PTI)
