However, this order would not be given effect for a period of four weeks from the date of its receipt by KSBL, as per a direction of the Securities Appellate Tribunal (SAT).
In a case involving large-scale irregularities in as many as 21 IPOs during 2003-2005, Sebi has found that KSBL "failed to maintain high standards of integrity and further indulged in manipulation and malpractices and thereby violated the code of conduct" specified in its Broker Regulations.
The six-month prohibition order would also apply to contract or launch of a new contract by KSBL, while it would also not be allowed to take new clients or customers during this period in respect of its stock brokerage business.
In his order dated March 14, Sebi's Whole Time Member Prashant Saran said, "I note that while the Enquiry Officer has exonerated KSBL from the charge that it is not a fit and proper entity, the Enquiry Officer has recommended that the certificate of registration of the noticee as a stock broker be suspended for a period of three months.
"As stated above, in a case where there has been widespread market abuse, the role of one entity should not be seen in isolation and that the collective roles and activities of all the entities concerned should be seen.
"I also note the submission that the noticee was restrained from indulging in proprietary trading for a period of 14 months. On considering the totality of the facts and circumstances, the interest of securities market, the market participants and my observations/findings and the restrictions on proprietary trading already suffered by the noticee, I am of the considered view that the following order would meet the ends of justice," he added.
During the hearing, KSBL submitted that the alleged irregularities occurred in its Ahmedabad Office and there were no findings in respect of other branches and that all their other branches had been conducting their business in compliance with the rules, regulations laid out and therefore any restraint on the entire operations would not be proper.
"In this regard, it needs to be noted that the certificate of registration granted to a stock broker is for his stock broking business and therefore any violation or misdemeanour on its part would attract penalty, if required, against its business as a whole.
"Given the large scale of abuse of the market and the role of the entities of the Karvy Group including the noticee, as discussed above, I do not find it appropriate to only restrain the stock broking business of the noticee in a particular branch," Saran said in his order.