Bajaj Finance moved the Securities Appellate Tribunal (SAT) against the markets regulator Securities and Exchange Board of India’s (SEBI) order barring Karvy Stock Broking from taking new clients in respect of its stock broking activities and also prevented it from using the PoA (Power of Attorney) given by clients after the broker was found to have allegedly misused clients’ securities.
SEBI has estimated the total exposure of lenders to Karvy at Rs. 2,800 crore. Out of this SEBI has estimated the total exposure of lenders to Karvy at Rs. 2,800 crore, of which Bajaj Finance has an exposure of Rs. 345 crore.
Bajaj Finance is aggrieved by the SEBI order, which prevents it from accessing its pledged shares. The firm claimed that it has the right to its pledged securities and that SEBI was wrong in returning the securities to the accounts of Karvy’s clients.
The National Stock Exchange of India Ltd (NSE) and the Bombay Stock Exchange (BSE) had on 2nd
December 2019 suspended Karvy’s trading license for all segments due to non-compliance with the bourse’s and SEBI norms. Multi Commodity Exchange (MCX) and Metropolitan Stock Exchange of India (MSEI) also suspended the license of the brokerage firm.
HDFC Bank Ltd, ICICI Bank Ltd and some other lenders have joined Bajaj Finance in its plea against the SEBI move. An order in their pleas will be passed later. SAT asked SEBI to hear Bajaj Finance’s plea by 4th December 2019.
Due to the prompt action by SEBI against Karvy, nearly 83,000 investors got back their securities, which were illegally transferred by the brokerage firm to its own account and were un-authorizedly pledged.
With the latest transfer by National Securities Depository Ltd (NSDL), nearly 90% investors have got back their securities and the remaining ones will get after clearing their dues.
Karvy had taken loans of nearly Rs. 600 crore by pledging securities worth more than Rs. 2,300 crore of 95,000 clients with lenders. Out of these, 95,000 clients, nearly 83,000 of them have got their securities.