SEBI Chairman Ajay Tyagi said on Wednesday that Karvy Stock Broking (KSBL) was indulging in activities which were ‘never allowed’. The fact that KSBL was pledging client shares without their consent came to light last Tuesday when a SEBI order partially banned the brokerage from doing client business.

A probe report by the NSE had found that KSBL was in violation of several broker-related norms for several months. The full probe report of NSE is yet to be made public and KSBL had 21 days to represent to SEBI as it was not given a hearing while passing the order.

Tyagi added that, in June, SEBI had made its stance explicit through a circular and hinted that there was no case for entities to indulge in such practices before that as well.

“What is basically never allowed was being done. It is not that this separation was asked in June,” he told reporters on the sidelines of the Organisation for Economic Co-operation and Development (OECD) Asian round-table on corporate governance here.

“It cannot be anyone’s case even if these instructions were not so explicit that they can use clients’ securities for doing something (of) their own,” he added.

He mentioned proprietary trades or investments in other businesses while elaborating on the possible activities that a brokerage may carry out.

“This is a very basic thing which can’t be allowed,” he reiterated.

Last Friday, SEBI barred Karvy from taking on new clients with respect to stock broking activities for alleged misuse of clients’ securities.

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