Sebi bars Karvy from taking new assignment for a year

Move with respect to 2003-05 IPO scam

Market regulator Securities and Exchange Board of India (Sebi) today passed an order against Karvy Stock Broking Ltd (KSBL) that bars it from taking up any new assignment for one year.

This bar comes as a consequence of the role played by Karvy in the Initial Public Offer (IPO) scam of 2003-2005. 

However, the investment manager would be able to continue any primary activity that it had undertaken before today’s order. In the IPO scam the regulator had found that Karvy had played a role adiing key operators in cornering of shares in IPO's of various firms. 

In an order, Sebi directed "KSBL not to undertake new primary market assignment including acting as syndicate member or providing syndication services (procuring IPO applications and bidding in IPOs), directly or indirectly, in IPOs for a period of one year." 



The ruling follows a Securities Appellate Tribunal (SAT) direction, issued in January this year, where Sebi was asked to pass a fresh order within four months. In March 2014, the regulator had barred KSBL from taking up new assignment for six months as a stock broker. 

In its investigations into IPO scam, Sebi found that many individuals and entities had opened various demat accounts in fictitious/benami names and cornered shares that were meant for retail investors. 

On allotment of shares under retail category, the same were transferred to demat accounts of the key operators who subsequently transferred the shares in off-market deals to ultimate beneficiaries who were the financiers in the IPOs.