Karvy Stock Broking today settled a probe by Sebi into alleged non-compliance with various requirements, including the Know Your Client (KYC) due diligence.
Sebi agreed to settle proposed adjudication proceedings in the case after it was approached by Karvy with a plea under the settlement regulations and paid Rs 6.8 lakh towards settlement charges.
"The pending adjudication proceedings initiated against KSBL (Karvy Stock Broking Ltd)... Is hereby disposed of in terms of... The settlement regulations," Sebi said in a settlement order, adding that it would not initiate any enforcement action for the alleged defaults.
The Securities and Exchange Board of India (Sebi) said it conducted an inspection of books of accounts and other records of KSBL. The inspection was carried out to look into the various compliance requirements, including KYC due diligence carried out by it during April 2011 to November 2012.
Based on analysis of samples and test checking of various books of accounts and other records as well as submissions of KSBL and its staff provided to the inspection team, several lapses or deficiencies were alleged, the order stated.
It was alleged that KSBL did not take into account client needs while managing the client portfolio and KYC of certain clients were found to be incomplete.
Also, it was alleged that KSBL did not clearly provide the actual amount of fees payable by the client and allegedly frozen the client's accounts, hence the brokerage house did not observe high standards of integrity and fairness in conduct of business.
Further, it was alleged that KSBL imposed a lock-in on the client's funds and did not allow the clients to withdraw their assets by voluntarily terminating the agreement and it allegedly did not disclose various actions initiated by Sebi against it and its associates in the disclosure document.
While proceedings against KSBL were in progress, it had offered to settle the matter on payment of Rs 6.8 lakh towards settlement fees.
Thereafter, Sebi's High Powered Advisory Committee recommended the case for settlement on payment of the amount. This was also approved by Sebi's panel of whole-time members, following which the amount was remitted.
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