The Hindu Business Line : Karvy group decides to contest SEBI order

Appeal
The company has been penalised for involvement in the IPO share allotment scam in 2005.
Karvy in the process of preparing a legal brief to contest the orders with Securities Appellate Tribunal.

Hyderabad/Mumbai June 23 The Karvy group has decided to go for an appeal against the SEBI order that prohibited Karvy Stock Broking Ltd (KSBL) as Depository Participant from opening fresh demat accounts till the end of the calendar year.

The market regulator also suspended Karvy Stock Broking as a stockbroker for three months. The company has been penalised for involvement in the IPO share allotment scam in 2005.

The direction on demat accounts will come into effect immediately, while the order on the suspension of the certificate of registration will come into effect 21 days from the date of the order.

Reacting to the order, sources in Karvy said the company was in the process of preparing a legal brief to contest the orders with Securities Appellate Tribunal.

The Friday order came into force with immediate effect. "We will contest the order on the both the counts very soon," the sources said.

"We have replied to most of the observations earlier. We will do it afresh again," they said.

The SEBI probe threw light on bulk bidding of applications by the company as a broker. "KSBL as a broker of NSE and also as a sub-syndicate member had bid for the 10,900 applications forms pertaining to key operators financed by Karvy Consultants Ltd. "A sample data revealed that many applications had been entered by one or a few employees of Karvy. The time gap between entry of successive applications was only 2-3 seconds. Many of the applications had shared a few surnames," the 12.20 point in the order said.

Sharing surnames

When asked about this observation, the Karvy sources, while saying that they didn't go through the order fully, said that it was not uncommon to bid for applications in bulk. Distributors procure applications in bulk.

On similar names and common addresses, the sources gave the analogy of an imaginary `Shaw'. If a Shaw, his wife, son and other kin applied, they all share the common surname that is Shaw. "There is nothing abnormal about it," they said.

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