SEBI Issues Rs.1.8 Crore Demand Notices to Three Former Officials of Karvy Group

SEBI Issues Rs.1.8 Crore Demand Notices to Three Former Officials of Karvy Group

Failing to make the payment within 15 days, they have been warned of arrest and attachment of assets and bank accounts

The Securities and Exchange Board of India (SEBI) has sent demand notices to three former officials of the Karvy Group, asking them to pay about Rs.1.8 crore for misappropriating client's funds by Karvy Stock Broking Ltd (KSBL).

The notices came after the officials failed to pay the fine imposed on them in May. The ex-officials are - Krishna Hari G (VP-F&A); Srikrishna Gurazada (compliance), and Srinivasa Raju (general manager, back-office operations).

In three separate notices, while SEBI directed Hari G to pay Rs.1.06 crores, it ordered Raju and Gurazada to remit Rs.42.41 lakh and Rs.31.81 lakh, respectively. This includes interest and recovery costs.

The capital markets regulator made it clear that in the event of non-payment of dues, the amount would be recovered by attaching and selling moveable and immovable property of the officials. Also, their bank accounts would be attached, and they would be arrested.

KSBL had raised huge funds by pledging clients' securities and misusing the Power of Attorney granted to it by its clients. Further, the funds were diverted to its group entities, violating various provisions of the law.

Till May 2019, KSBL sold excess securities of Rs.485 crores through nine related entities, which were also its clients. The company then transferred excess securities to six out of the nine entities.

In September 2019, the overall borrowing of the firm, which raised loans from financial institutions by pledging shares of its clients as collateral, was Rs.2,032.67 crores. The value of securities pledged by the stockbroker was Rs.2,700 crores.