Stock market regulator Securities and Exchange Board of India (SEBI) has barred Karvy Stock Broking Ltd (KSBL) from taking new clients for stockbroking activities following allegations of misusing certain securities.
The National Stock Exchange (NSE) of India Ltd had forwarded a preliminary report to SEBI on Friday on the non-compliances observed with respect to pledging and misuse of client securities by KSBL.
The exchange's preliminary report is the result of the limited purpose inspection of KSBL conducted on August 19, covering a period from January 1 onwards.
"The acts of KSBL are prima facie in violation of Stock Broker Regulations," said SEBI's Wholetime Member Ananta Barua in a 12-page ex-parte interim order. "Therefore, there is a need for urgent regulatory intervention to prevent further misuse of clients' securities."
It added: "KSBL is prohibited from taking new clients in respect of its stock broking activities."
Besides, SEBI directed National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL) not to act upon any instruction given by KSBL in pursuance of power of attorney given by its clients.
"The depositories shall monitor the movement of securities into and from the DP account of clients of KSBL as DP to ensure that clients' operations are not affected," the SEBI order said. KSBL has been given 21 days to file its objections or responses if any.
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