SEBI issues penalty recovery notice to BSE, NSE in Karvy Broking case

15 Jun 22

The Securities and Exchange Board of India today raised a notice of demand for recovery of penalty of 30.9 mln rupees, including interest, from BSE Ltd and another one for recovery of 20.6 mln rupees, including interest, from the National Stock Exchange of India.

The notices were sent to the two exchanges for not complying with SEBI’s orders in April against them in the Karvy Stock Broking case.

On April 12, SEBI had imposed penalties on the NSE and BSE, through two separate orders, for their failure in timely detection of the fraudulent conduct of Karvy Stock Broking which had membership on both the exchanges.

The NSE was fined 20 mln rupees while the BSE was directed to pay 30 mln rupees in the SEBI orders.

In its orders, SEBI said that Karvy Stock Broking had misutilised client securities worth 23 bln rupees belonging to more than 95,000 clients by illegally pledging them from its demat account and raising funds against the pledges for itself and its group entities.

“The scale of misuse by KSBL (Karvy Stock Broking Ltd) points to the loss to investors which can potentially be caused when irregular conduct is not detected in a timely manner,” SEBI said in its orders, and held the two bourses responsible for not having checks and balances in place which could detect the fraud much earlier.

SEBI’s first order, an interim one, in the Karvy case was issued on November 22, 2019 when it barred the brokerage from taking new clients and imposed other restrictions.