Sebi slaps Rs 25-cr notice on Karvy arm, its CMD

New Delhi: Markets regulator Sebi on Wednesday sent a notice to Karvy Stock Broking Ltd (KSBL) and its CMD C Parthasarathy asking them to pay around Rs25 crore within 15 days in a case pertaining to misappropriation of clients’ funds by misusing the Power of Attorney.

The notice came after they failed to pay the fine imposed on them by the Securities and Exchange Board of India (Sebi). Sebi in April 2023 barred KSBL and Parthasarathy from the securities market for seven years and also imposed a penalty of Rs21 crore on them for misappropriating clients’ funds by misusing the Power of Attorney given to the broking firm. Individually, the regulator had levied a fine of Rs13 crore on KSBL and Rs8 crore on Parthasarathy, promoter-cum-managing director.

In its fresh notice, the regulator has directed KSBL and Parthasarathy to pay Rs15.21 crore and Rs9.36 crore, respectively, which includes interest and recovery cost, within 15 days. In the event of non-payment of dues, the markets regulator will recover the amount by attaching bank accounts, attaching as well as selling the entities’ moveable and immoveable property.

Besides, Parthasarathy may face ‘arrest and detention in prison’. The case relates to KSBL’s massive asset mobilisation drive followed by raising of huge funds from financial institutions by using the securities mobilised from the clients with a promise to pay them interest.

These funds were misappropriated and diverted to KSBL’s connected entities, thereby defaulting in its obligations to settle the securities and funds with the clients as per regulatory instructions.