Sebi slaps fines on BSE, NSE over Karvy fiasco
Regulator raps bourses for laxity in detecting misuse of clients’ funds worth Rs2,300 cr by Karvy Stock Broking (KSBL)
New Delhi: Capital markets regulator Sebi has penalised stock exchanges -- BSE and NSE -- for 'laxity' on their part in detecting misuse of clients' securities worth Rs2,300 crore by Karvy Stock Broking Ltd (KSBL).
In two separate orders, the Securities and Exchange Board of India (Sebi) has imposed a fine of Rs3 crore on BSE and Rs2 crore on NSE. The matter relates to KSBL misutilising client securities worth Rs2,300 crore, belonging to more than 95,000 clients, by pledging them from just one demat account. The funds raised against the pledge were used by KSBL for itself and its group entities. KSBL and its group entities utilised this money for raising Rs851.43 crore from 8 banks/NBFCs.
"Without doubt, it was KSBL which misused clients' securities by unauthorisedly pledging them, and was thus responsible for loss caused by pledging securities which it did not own, including loss to investors as well as loss to banks and NBFCs who loaned funds to KSBL against securities which did not belong to KSBL," as per the orders passed on Tuesday. Sebi noted that KSBL being member of BSE and NSE was under regulatory supervision of the exchanges. There was 'laxity' on the part of exchanges, which resulted in delayed detection of the misconduct by KSBL and the bourses need to be held accountable for the same.