Sebi bans Karvy & promoter for 7 yrs, slaps Rs 21 crore penalty in Hyderabad

HYDERABAD: Nearly three-and-half years after the Karvy Stock Broking Ltd (KSBL) scam came to light, markets regulator Sebi has, in its final order, banned the stock broking firm as well as its promoter, Commandur Parthasarathy, from the stock markets for seven years and slapped a 21 crore penalty, including 13 crore on KSBL and 8 crore on Parthasarathy.Also, Sebi restrained Parthasarathy from holding the post of director, key managerial position or associating himself in any capacity with any listed public company, or any company planning to raise money from the public or even any Sebi-registered intermediary for 10 years.Sebi’s whole-time member S K Mohanty, in the final order, also ordered Karvy Realty (India) Ltd (KRIL) and Karvy Capital Ltd (KCL) to return 1,443 crore diverted from KSBL in three months.If they fail to return the money, Sebi has directed National Stock Exchange (NSE) to take control of KRIL and KCL’s assets to recover this amount. While Karvy Realty had received 1,094.19 crore from KSBL from 2016-17 to 2019-20, Karvy Capital received 348.76 crore.Sebi observed while there was no allegation against KSBL, Parthasarathy and two of its then directors Bhagwan Das Narang and Jyothi Prasad on direct gain from the funds transferred, their action caused mental agony to over 3 lakh clients, whose funds and securities were not settled by KSBL in line with the Sebi prescribed process and timelines.“Mental agony of clients is persisting even though more than three years have elapsed since the interim order as their funds and securities have not been settled. I find securities of the clients were being regularly pledged by KSBL since 2016,” said Mohanty. Such wrongdoing was not a one-time exercise, but committed repeatedly till the interim order restricted KSBL from acting on the power of attorney vested by clients, he said, indicating the factors that decided penalty.While Sebi imposed a penalty of 5 lakh each on Narang and Jyothi Prasad, it gave a clean chit to Yugandhar Meka, one of the Karvy Group co-founders, stating his role was more of a whistleblower than perpetrator as he had flagged misuse of clients funds in January 2017.