Stocks

After Karvy, another broker VRise under SEBI scanner for share pledging

PALAK SHAH Mumbai | Updated on December 03, 2019 Published on December 03, 2019

Karvy Stock Broking will provide a detailed explanation and clarifications to the regulator

Another Mumbai based stock broker VRise has come under SEBI scanner for complaints of alleged pledging of client securities, sources told Business Line. Officials of VRise have been called by SEBI and stock exchange NSE for further probe, the sources said.

SEBI is reviewing a large number of complaints from clients for misuse of power of attorney and pledging of their shares for loan without consent. The recent case involving Karvy has blown the lid of the brokers modus operandi, the sources said.

When contacted, Ankit Chheda, director, Vrise said over the phone that, “We have not pledged any shares of clients. Will clarify our positions to SEBI.”

News reports suggested that VRise had pledged client shares worth around ₹37 crore to another firm, for which there was no client consent. The report also said that a total of ₹37 crore in securities is stuck in the stalemate between VRise Securities Pvt Ltd, a brokerage house and Edelweiss Custodial Services Ltd, a clearing member.

Reportedly, there are a bunch of top few brokers who availed loan of more than ₹7,000 crore by pledging shares with banks and finance companies. Banks give loan based on fact that shares are lying in brokers account. But the Karvy case has highlighted that the shares in a brokers account could also belong to clients. There is no mechanism with exchanges and clearing corporations to separate client collateral from that of the brokers, which many a times are also shares. Clearing corporations give trading limits to brokers based on assets deposited with them. Recent cases have highlighted that brokers use up client securities as collateral for trading limits and finance, mainly in derivative segment.

Published on December 03, 2019
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