In the aftermath of the Karvy Stock Broking episode, capital markets regulator Securities and Exchange Board of India on Wednesday said the brokerage was indulging in activities which were "never allowed".
The comments from SEBI Chairman Ajay Tyagi come days after the regulator banned with immediate effect Karvy Stock Broking for selling client stocks pledged with it through associated entities.
According to Tyagi, SEBI had in June made its stance explicit through a circular and hinted that there was no case for entities to indulge in such practices before that as well.
"What is basically never allowed was being done. It is not that this separation was asked in June," he told reporters on the sidelines of the Organisation for Economic Co-operation and Development-Asian roundtable on corporate governance.
"It cannot be anyone's case even if these instructions were not so explicit that they can use clients' securities for doing something (of) their own," he added.
The SEBI chairman mentioned proprietary trades or investments in other businesses while elaborating on the possible activities that a brokerage may carry out. "This is a very basic thing which can't be allowed," he reiterated.
Also Read: India Must Clean Up or Clear Out Dodgy Brokers
Last Friday, SEBI barred Karvy Stock Broking from taking new clients with respect to stock broking activities for alleged misuse of clients' securities.
The action came after the National Stock Exchange forwarded a preliminary report to SEBI on the non-compliances observed with respect to the pledging/misuse of client securities by Karvy Stock Broking.
Also Read: Karvy Sebi Ban: Why Investors May Not Be Able To Seek Recourse From Investor Protection Fund
The exchange's preliminary report is the result of the limited purpose inspection of Karvy Stock Broking conducted by it on Aug. 19, covering a period from Jan. 1 onwards, SEBI had said in an order.
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.
