Sebi Clampdown: Karvy and CMD Parthasarathy's Assets Attached Over Misappropriation Scandal

Markets regulator Sebi ordered the attachment of bank accounts and financial holdings of Karvy Stock Broking and its CMD, C Parthasarathy, to recover Rs 25 crore in dues related to fund misappropriation. Sebi previously barred the firm and its director from the securities market for seven years and fined them Rs 21 crore for misappropriating client funds using the Power of Attorney granted by clients.

On Thursday, markets regulator Sebi mandated the attachment of bank accounts, shares, and mutual fund holdings belonging to Karvy Stock Broking and its Chairman and Managing Director, C Parthasarathy. This action aims to recover approximately Rs 25 crore in dues.

Earlier, on August 7, Sebi issued a notice to Karvy and Parthasarathy instructing them to settle the outstanding amount within 15 days, stemming from a case involving the misappropriation of client funds through misuse of the Power of Attorney (PoA). The notice followed the entities' failure to comply with a previously imposed penalty.

In April 2023, Sebi banned KSBL and Parthasarathy from the securities market for seven years, imposing a Rs 21 crore penalty for misusing clients' PoA to misappropriate funds.

Sebi's latest move includes four separate attachment notices to cover pending dues of Rs 15.34 crore from KSBL and Rs 9.44 crore from Parthasarathy, which includes interest and recovery costs. The regulator expressed concerns that the defaulters might dispose of assets, delaying the realization of due amounts.

Banks, depositories, and mutual funds have been instructed to block any debits from the accounts. The case traces back to KSBL's asset mobilization strategy and fund-raising ventures, which were diverted to connected entities, ultimately failing regulatory obligations to settle securities and funds with clients.

(With inputs from agencies.)