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NISHA Nayak made post

Why has SEBI turned down the SAT order to review the order banning all POA trades of Karvy and preventing them from opening fresh demat accounts?

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9 months ago

Let me just help you reframe the idea. SEBI has passed order restraining Karvy from opening new trading accounts and also executing any POA transaction on behalf of clients. Karvy had approached the Securities Appellate Tribunal (SAT) order against the SEBI order since it was an ex-parte order and Karvy had 21 days time to submit its explanations. SEBI had accused Karvy of transferring shares out of client demat accounts in an unauthorized manner and transferring it into its group companies. Karvy had also pledged these shares and taken loans against these shares. In response to the review filed by Karvy, SAT had asked SEBI if it wanted to reconsider its decision to put a blanket ban on Karvy. The final SAT order will be out on 2nd December. This is the background of the case.

However, SEBI rejected any interim relief to Karvy Stock Broking on this issue and so now you will have to wait for the final SAT order on the Karvy case. In a late night Friday order, one of the whole-time members of SEBI said considering the preliminary findings on the enormity of violations, it would not be prudent to allow Karvy the usage of POA.

SAT on Friday had asked SEBI to decide on whether it was possible to give any interim relief to Karvy by Monday that would enable it to settle client trades. The matter pertains to a 22 November order by SEBI barring Karvy from using power of attorney after the broker allegedly transferred clients’ money for other purposes and indulged in trades not authorized by them. The actual size of the misuse is still not clear but it is estimated to be upwards of Rs.2000 crore.

Following these restrictions, Karvy made representations that it was unable to settle trades of clients and suffered losses of Rs.8 crore in the last one week. However, SEBI was of the view that the charges were too grave for Karvy to be allowed to continue doing the business. Denying any interim relief, SEBI said in addition to mis-utilization of client funds, Karvy continued to create additional pledges on client securities making their continuation in the business entirely untenable.