Karvy Stock Broking involved in IPO irregularities: Sebi
Jan 28 2014 , Mumbai
Citing that the depository participant "has already undergone such prohibition for 18 months and 26 days", Sebi has decided not to impose any further penalty.
The Securities and Exchange Board of India (Sebi), in its order today, said the, "acts and conduct of Karvy Stock Broking are unfair and fraudulent" within the scope of regulations.
Sebi said the entity is liable to be prohibited from taking up any new assignment for a period of 18 months for its involvement in IPO irregularities.
However, the regulator said that Karvy has already undergone such prohibition for 18 months and 26 days.
"In view of the same, there need not be any further penalty," the order said.
The market regulator's probe has found that Karvy Stock Broking had opened various demat accounts in fictitious/ benami names and aided and abetted various key operators to corner the shares in the IPO.
Sebi said while Karvy Stock Broking had tried to distance itself from the activities of the other Karvy group entities and the key operators in the IPO scam, it was clear that "all of them had acted in concert and facilitated cornering of the shares...
"and by no stretch of imagination can the role of Karvy Stock Broking be considered independent to the scheme of cornering of shares," it added.
"I note that the Karvy group as a whole appeared to have favoured an extremely aggressive approach to business leading to their direct involvement in the IPO manipulation," he said.
"Even if, I were to accept the said submission of Karvy Stock Broking, the fact that would remain is that it had turned a blind eye to the unusual situation where names and surnames appear in hundreds of accounts with mathematical regularity and points to much more than merely not exercising proper diligence and prudence," he added.
Pursuant to a preliminary enquiry, Sebi in June 2007 had passed a common order in respect of all Karvy entities, including Karvy Stock Broking. In the order, Sebi had barred the depository participant from opening fresh demat accounts.
Sebi had conducted a preliminary examination upon noticing certain irregularities with respect to IPOs of different companies.
These entities were found to have cornered the IPO shares by making fictitious applications in the retail category through various fictitious/ benami applicants.
Pursuant to the allotment, the shares were transferred to the demat account of these entities.
Further, it was also revealed that these key operators had transferred the shares through off-market deals to ultimate beneficiaries, who were the financiers in the process.