Fist of fury knocks out Karvy from ring

In a major crackdown on prime suspects in the demat scam unearthed by Sebi recently, the stock market regulator has come down heavily on Hyderabad-based Karvy DP, one of the players in the misuse of share allotment in about 105 IPOs.

Sebi, in its interim order on the IPO scam, has barred Karvy DP and Pratik DP from acting as depository participant (DP) till the completion of enquiry against the two entities and passing of the final order. Market sources fear that the Sebi action on Karvy would lead to serious consequences as the DP has more than 1000 demat accounts with it. They, however, feel that Sebi has to clarify on certain issues like the time limit, within which beneficiary accounts are to be transferred to another DP. Karvy is also a major share transfer agent and registrar for a number of companies.

The DPs can only effect transfer of beneficiary account to another Sebi-registered DP on request, said Sebi. Repeated efforts to talk to Karvy chairman C Parthasarathy was futile as he did not respond to ET's calls. M Yugandhar, Karvy MD, could not comment on the Sebi order. "I am not aware of the development as I am travelling aboard."

Suspecting that other Karvy group companies would have played a role in the scam, Sebi ordered four companies — Karvy Stock Broking, Karvy Computershare, Karvy Investor Services and Karvy Consultants — not to undertake fresh business as registrar and share transfer agent, except in businesses they have already tied up.

In the order, Sebi said that Karvy DP and Pratik DP prima facie do not appear to be fit to deal in securities market as Sebi-registered intermediaries. The regulator also said that appropriate quasi-judicial proceedings are being initiated against the two DPs.