Stock market regulator Sebi bans Karvy Stock Broking from taking new clients and executing new trades following alleged misappropriation of shares and funds of its clients' worth Rs 2,000 crore. Deven Choksey of KRChoksey Securities and SP Tulsian of sptulsian.com spoke about the
Choksey said the broker’s job is not to do clearing of trades and custodial activities of the trade. "If at all they have to separate they must separate the post-transaction activity which is clearing and settlement activity and the custodial activity of the trade into a separate custodial,” he added.
He further said, “Their job is to basically ensure that they bring the client onto the platform, help them transact and not clearing and settlement of custodial activity. If they don’t do it and if they do make any such tinkering around with this particular subject of broker account, client account etc., I think these issues are not going to settle. They will surface in some different direction thereafter. There is a change requirement and that is required to be done on ASAP basis.”
Read: No instance of misuse of clients’ securities, says Karvy Group
Tulsian said, besides apart from barring the promoter, Sebi should immediately refer the matter to the Economic Offences Wing (EOW). "The broker should get arrested because this is a very serious issue and let us not take it lightly that this is just an impact of about Rs 2,000 crore with Karvy.”
Reacting to Choksey’s clearing and settlement point, he said, “This is very much a job of a broker. He has pilferage, he has stolen the shares from the demat account of his clients on the pretext that he wants to have power of attorney for completing security paying.”
“The only method by which Sebi can bypass this because each client has been mapped up with the stock exchanges; suppose if client A has executed a trade, the broker has to punch his client code number and that number is mapped in with the exchanges,” Tulsian added.
In such a scenario, said Tulsian, “Instead of transferring the shares to the pool account on the security payout day to the broker’s pool account, Sebi can directly or maybe the NSE or exchanges or maybe the Central Depository Services Limited (CDSL) and National Securities Depository Limited (NSDL) can directly transfer shares to the account of the client. Similarly it should happen with security pay in also because when the client is selling the shares, he should not be given the power of attorney to touch the demat account of any client.”“This is much more a serious offence. Sebi should immediately refer this Karvy matter to EOW of the respective state police station and the directors and owners of those broking company should get arrested,” Tulsian further added.