Karvy Stock Broking (KSBL) owes less than Rs 40 crore to its clients which will be repaid over the due course, said a top official. The brokerage refuted claims that it has defaulted to the tune of Rs 2,000 crore.
"Don't know where the Rs 2,000 crore figure has come from. I would like to say all the securities are intact. All these will be credited back to the regular accounts. So investors don't have to worry as to what will happen to their securities. There is no default in this particular case. The Sebi order says that the securities have not been dealt with properly. The have been utilised for other purposes," said a top official with the brokerage.
The official didn't want to come on order as the matter is sub judice.
On Friday, the Securities and Exchange Board of India (Sebi) passed an ex-parte interim order against KSBL barring it from taking new clients for misuse of client funds.
The official said some of the client shares were used for proprietary trading.
"What we do is, we sell on one exchange and buy it on other exchange. Basically it is arbitrage. These are the things, which have not been properly understood. Which we will explain the regulator soon. The number looks large as it is over a period of time. On a daily basis, it is a very small order,” the official said adding that “Some Rs 40-50 crore of client money needs to be paid, which will be done in normal course.”
The official said their clients are starting to worry after the Sebi order and the company is reaching out to them to explain the ground reality.
"We are communicating to everyone that everything will be fine. As we clarify on all the aspects, we will be able to regain trusts and things will be normal soon," the official said.
Besides the Sebi rap, KSBL also suffered a rating downgrade by ICRA.
The official said the downgrade had nothing to do with misuse of client funds.
“It is not linked to this. Please note it is just a downgrade and not a default. The rating is for Karvy stock Broking and its subsidiary companies. For the subsidiary companies the parent has to give a guarantee. But we are prohibited from giving a guarantee as it becomes a structured obligation under a new rule for brokers. Therefore, we haven't given any guarantee.”
Industry players said several brokers are feeling the heat of Sebi's move to bar them from using client funds — a practice that was fairly rampant in the broking industry.
In June, Sebi cracked the whip on such practice directing all the brokers to wound up all such accounts. It directed all the players to unpledge and return clients funds. Many brokers missed the August-31 deadline set by Sebi and also the extended deadline of September 30.
"Don't know where the Rs 2,000 crore figure has come from. I would like to say all the securities are intact. All these will be credited back to the regular accounts. So investors don't have to worry as to what will happen to their securities. There is no default in this particular case. The Sebi order says that the securities have not been dealt with properly. The have been utilised for other purposes," said a top official with the brokerage.
The official didn't want to come on order as the matter is sub judice.
On Friday, the Securities and Exchange Board of India (Sebi) passed an ex-parte interim order against KSBL barring it from taking new clients for misuse of client funds.
The official said some of the client shares were used for proprietary trading.
"What we do is, we sell on one exchange and buy it on other exchange. Basically it is arbitrage. These are the things, which have not been properly understood. Which we will explain the regulator soon. The number looks large as it is over a period of time. On a daily basis, it is a very small order,” the official said adding that “Some Rs 40-50 crore of client money needs to be paid, which will be done in normal course.”
The official said their clients are starting to worry after the Sebi order and the company is reaching out to them to explain the ground reality.
"We are communicating to everyone that everything will be fine. As we clarify on all the aspects, we will be able to regain trusts and things will be normal soon," the official said.
Besides the Sebi rap, KSBL also suffered a rating downgrade by ICRA.
The official said the downgrade had nothing to do with misuse of client funds.
“It is not linked to this. Please note it is just a downgrade and not a default. The rating is for Karvy stock Broking and its subsidiary companies. For the subsidiary companies the parent has to give a guarantee. But we are prohibited from giving a guarantee as it becomes a structured obligation under a new rule for brokers. Therefore, we haven't given any guarantee.”
Industry players said several brokers are feeling the heat of Sebi's move to bar them from using client funds — a practice that was fairly rampant in the broking industry.
In June, Sebi cracked the whip on such practice directing all the brokers to wound up all such accounts. It directed all the players to unpledge and return clients funds. Many brokers missed the August-31 deadline set by Sebi and also the extended deadline of September 30.
No comments:
Post a Comment