SAT suspends Sebi notices to ESB and NSE in Karvy Stock Broking case

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The Securities Appeals Tribunal (SAT) on Thursday suspended Sebi’s Notices of Demand issued to stock exchanges, BSE and NSE, in a case related to Karvy Stock Broking Ltd (KSBL), in which the regulator had asked them to pay over Rs 5 crore within 15 days.

In its order, the appeals tribunal observed that these appeals had been listed for admission on June 14, at which time the cases were adjourned for June 21, and an oral instruction was given to Sebi that no recovery had to be completed before that date.

“Despite the oral instruction of this Tribunal, it appears that a formal notice was issued. It is regrettable that despite an oral instruction, a formal notice was issued on June 15, 2022 by the ‘collection agent,’ the SAT said. .

Accordingly, SAT ordered that no collections be made from the appellants until the next registration date.

“The notice of formal notice dated June 15, 2022 is suspended and no recovery will be made before the next registration date,” he added.

On Wednesday, Sebi sent notices to stock exchanges in a KSBL-related matter and warned of seizure of assets and bank accounts if they failed to make payment within 15 days.

In two separate notices, Sebi ordered BSE and NSE to pay Rs 3.09 crore and Rs 2.06 crore respectively, plus additional interest, all costs, fees and expenses within 15 days.

This amount includes the penalty, interest from April 12 to date and collection costs.

In the event of non-payment of dues, the market regulator will recover the amount by seizing and selling the movable and immovable property of the stock exchanges. In addition, exchanges face the seizure of their bank accounts.

Also, the regulator can take the route of arrest and detention in jail to recover the amount.

The notices came after exchanges failed to pay the fine imposed on them by the Securities and Exchange Board of India (Sebi).

In an April 12 order, Sebi had fined Rs 3 crore on ESB and Rs 2 crore on NSE for “laxity” on their part in detecting misuse of clients’ securities by KSBL.

The case concerns the misuse of customer securities worth Rs 2,300 crore by KSBL, belonging to more than 95,000 customers, by pledging them from a single demat account. The funds raised against the pledge were used by KSBL for itself and its group entities.

KSBL and its group entities used the money to raise Rs 851.43 crore from eight banks/non-bank financial companies (NBFCs).

(Only the title and image of this report may have been edited by Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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