Sebi rejects Karvy's request to use PoA to settle customer payment obligations to exchanges
New Delhi, December 2 () The market regulator, Sebi, rejected Karvy Stock Broking's statement of using power for the limited purpose of transferring securities to the group account to settle customer payment obligations to exchanges of values.
In his order of November 29, Sebi noted that stockbroker customers are free to use various modes to instruct brokers, including through power of attorney (PoA) and giving instructions through PoA is not mandatory. .
Sebi noted that his circular on the Delivery Instructions Sheet (DIS) provides a detailed framework for instructions for the delivery of securities, such as instructions received from illiterate people/blind people/via fax, SPEED-e service, etc.
Securities vendors use a DIS to instruct their depository participant to debit their demat account.
If a customer seeks to give instructions in physical form, they can also do so by faxing the DIS to the depositary participant and the original DIS can be sent within three days of the fax. The client that seeks to send physical DIS, in addition to faxing it, has the option of delivering it to the participant's deposit agent's offices, Sebi said.
Friday's Sebi directive came after the Securities Appeals Court asked the regulator to examine the issue of clarification requested by Karvy Stock Broking regarding the use of PoA granted by customers.
He asked Sebi to approve an appropriate order after giving a hearing opportunity before December 2, 2019.
Sebi, through an order approved on November 22, had banned Karvy from taking new clients regarding his stock brokerage activities and also prevented him from using the PoA given by clients after it was discovered that the broker allegedly did Misuse of customer values.
The order was the result of a preliminary report sent by the National Stock Exchange on the breaches observed regarding the commitment/misuse of customer values by Karvy.
In accordance with Sebi's order, the broker filed a guilty plea with the SAT, seeking certain clarifications regarding the restrictions imposed by the regulator, as they were creating a problem in resolving their clients' exchanges with the camera of compensation.
In his last request, Sebi said that the KSBL forensic audit, initiated by the NSE, is in progress and the extent of misuse of customer values will be known after the completion of the forensic audit.
In addition, he said it would not be prudent to allow the use of PoA by KSBL (Karvy Stock Broking Ltd) that his clients have given him, as KSBL said. Therefore, KSBL customers looking to sell securities through KSBL can thus use only electronic or physical DIS. MR