Sebi orders to attach bank, demat accounts of ex-officials of Karvy Group

Sebi has ordered the attachment of bank and demat accounts of Karvy Group's three former officials to recover Rs 1.80 crore for the misappropriation of client's funds by Karvy Stock Broking Ltd (KSBL).

The recovery proceedings against KSBL's former VP (finance and accounts) Krishna Hari G; KSBL's former compliance officer Srikrishna Gurazada; KSBL's General Manager of back office operation Srinivasa Raju for Rs 1.80 crore, includes interest, all costs, charges and expenses, Sebi said in three attachment orders on Tuesday.

In its notices, Sebi asked all banks, depositories, and mutual funds not to allow any debit from the accounts of Krishna Hari G, Srikrishna Gurazada and Srinivasa Raju. However, credits have been permitted.

Further, the market regulator has directed all the banks to attach all accounts, including lockers, of the defaulters.

Last month, Sebi sent demand notices to -- Krishna Hari G, Srikrishna Gurazada and Srinivasa Raju -- asking them to pay about Rs 1.8 crore in the case of the misappropriation of client's funds by Karvy Stock Broking.

In May this year, Sebi levied a fine of Rs 1 crore on Krishna Hari G, Rs 40 lakh on Raju, and Rs 30 lakh on Gurazada.

The case relates to KSBL's huge funds raising by pledging clients' securities and misusing the power of attorney (PoA) granted to it by its clients. Further, the funds by KSBL were being diverted to its group entities, thereby, violating various provisions of the law.

KSBL had sold excess securities to the tune of Rs 485 crore through nine related entities, which were also its clients, till May 2019.

Further, KSBL had also transferred excess securities to six out of these nine related entities.

Moreover, the overall borrowing of KSBL, which was raising loans from financial institutions by pledging shares of its clients as collateral, was Rs 2,032.67 crore by September 2019 and the value of securities pledged by the stock broker was Rs 2,700 crore during the period.