Intermediaries to respond after studying the order

Our Bureau

Mumbai, April 28

A day after SEBI asking clients of Karvy to shift their accounts, several Depository Participants and brokers have started receiving large number of enquires from clients of the IPO scam-tainted entities.

The SEBI order on Thursday also banned several entities from undertaking fresh businesses.

In the case of Karvy DP, the clients have been asked to move to others within 15 days. Karvy being one of the leading DPs, several clients will be forced to shift their accounts.

This is expected to benefit other DPs, said a stockbroker.

"Already, we are seeing large number of enquiries for opening fresh demat accounts with us," said a senior official with a broking firm, which is listed on the bourses. The SEBI order also asked 12 entities, including HDFC Bank, ING Vysya, Wellworth Shares and Infinite Financial Services not to open fresh DP accounts till further directions.

Meanwhile, all the intermediaries named in the SEBI order said they would respond to the order, after studying the order in detail.

Though some entities including Motilal Oswal Securities sought an appointment with the SEBI Whole-Time Director, Mr G. Anantharaman, who passed the order, the plea was not granted.

Stocks suffer

On the bourses, shares of the stock broking firms reacted sharply following the SEBI order. While Indiabulls slipped by 9.15 per cent to close at Rs 282.50 while Networth Stock Broking declined by about 2 per cent Rs 145. Shares of IL&FS Investsmart, which was also named in the SEBI order, also witnessed selling pressure. Emkay Shares and Stock Brokers, which was listed on the bourses today, however, saw its shares ending higher than the issue price.

Reacting to the SEBI order, an official of Motilal Oswal Securities said the company was quick to communicate to its clients on the order. Motilal Oswal, which has over 1.5 lakh DP accounts, also does not fear erosion in its business. "Stock broking is our main business. This will not be impacted by the SEBI order," the official said.

A spokesman for IDBI Bank said: "We will make our submissions to the appropriate authorities within the stipulated time frame."

SEBI has given 15 days' time for the entities nailed in order.

Officials of NSDL and CDSL were unavailable for comments. But sources said the depositories would respond to the order at an "appropriate time".

(This article was published in the Business Line print edition dated April 29, 2006)
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