Client fund misuse: NSE expels Karvy, Modex, 28 others in last 6 yrs
As many as 30 stock brokers, including Modex International Securities and Karvy Stock Broking, have been expelled by the National Stock Exchange (NSE) for misusing clients' funds in the past six years.
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New Delhi: As many as 30 stock brokers, including Modex International Securities and Karvy Stock Broking, have been expelled by the National Stock Exchange (NSE) for misusing clients' funds in the past six years.
The exchange took these decisions between July 2017 and March 2022, as these brokers failed to comply with the NSE guidelines, according to an update available with the bourse. These stock brokers have been declared as defaulters for non-compliance with the regulatory provisions of the bourse. In addition, they have been expelled from the membership of the exchange. In addition, the exchange has imposed monetary penalties against over 400 stock brokers and issued warnings to more than 700 stock brokers for non-compliance with the guidelines during the period under review. Under the NSE guidelines, stock brokers are required to fulfill their obligations and should not involve in any misconduct, or unprofessional conduct among others. Apart from Modex International Securities and Karvy Stock Broking, NSE has expelled Anugrah Stock and Broking, Fairwealth Securities, Kaynet Finance, BMA Wealth Creators, Allied Financial Services, CM Goenka Stock Brokers and Omkam Capital Markets.
After conducting an inspection for the period from March to December 2019, the exchange expelled Modex International Securities in September 2020, on the charges of misuse of client funds and securities, shortfall in networth, non-settlement of client accounts, falsification of books and non-resolution of investor complaints. Besides, the capital markets regulator Sebi passed an interim order in April 2020, against Modex International Securities and its two directors for misusing clients' funds and securities. Further, a confirmatory order was passed by the regulator in September 2020, in the matter. Moreover, a case has been pending against Modex International Securities in Delhi High Court. In their plea to the court, 19 investors have alleged that the broker robbed off their precious, life time savings to the tune of Rs 28.5 crore and in addition deprived them of their future earnings in terms of dividends/bonus/buyback among others. These petitioners, mostly senior citizens, alleged that the overall size of the fraud is much bigger, about Rs 400 crore investors cheated an estimated Rs 300 crore.
