SEBI Imposes Fine of 5 Cr on BSE and NSE Alleging Negligence in Karvy Case

Capital markets regulator SEBI has imposed penalties on BSE (Bombay Stock Exchange) and NSE (National Stock Exchange). This fine on both is related to the scam of brokerage firm Karvy Stock Broking Ltd. Both the stock exchanges are alleged to have not taken any steps to prevent wrongful use of securities worth Rs 2,300 crore by Karvy to clients. SEBI has imposed a fine of Rs 3 crore on BSE and Rs 2 crore on NSE. The entire case pertains to misappropriation of securities of its clients by Karvy Stock Broking.

Karvy pledged securities worth Rs 2,300 crore of more than 95 thousand customers through just one demat account. The brokerage firm raised funds of Rs 851.43 crore from eight banks/NBFCs by pledging it for itself and its group companies. In this matter, SEBI along with NSE and BSE started investigation from June 2019. NSE appointed a forensic auditor and filed a preliminary report with SEBI in November 2019. Based on this report, SEBI issued an interim order and then issued another order.

In its 2019 order, SEBI ordered depositories to transfer security from a demat account under the supervision of NSE to the account of all customers who had paid in full. The securities were then returned to the customers. In December 2019, National Securities Depository Limited (NSDL) announced that securities have been returned to 82559 customers from Karvy Stock Broking Demat Account. After this, NSE said in November 2020 that the issue related to securities and funds of Karvy’s investors worth Rs 2,300 crore has been resolved. Now on Tuesday, SEBI has again issued an order in this matter and imposed a penalty on NSE and BSE.