NSE House Cleaning or Window dressing to go IPO? What about its sins?
As many as 30 stockbrokers, including Modex International Securities and Karvy Stock Broking, have been expelled by the National Stock Exchange (NSE) for misusing clients’ funds in the past six years. The exchange took these decisions between July 2017 and March 2022, as these brokers failed to comply with the NSE guidelines, according to an update available with the bourse.
Enforcement Directorate (ED) in January arrested Karvy Stockbroking CMD Parthasarathy and CFO Hari for swindling more than Rs.2874 crores of investors’ funds.[1]
NSE declared these 30 stockbrokers as defaulters for non-compliance with the regulatory provisions of the bourse. In addition, they have been expelled from the membership of the exchange. In addition, the exchange has imposed monetary penalties against over 400 stockbrokers and issued warnings to more than 700 stockbrokers for non-compliance with the guidelines during the period under review. Under the NSE guidelines, stockbrokers are required to fulfill their obligations and should not involve in any misconduct, or unprofessional conduct among others.
Apart from Modex International Securities and Karvy Stock Broking, NSE has expelled Anugrah Stock & Broking, Fairwealth Securities, Kaynet Finance, BMA Wealth Creators, Allied Financial Services, CM Goenka Stock Brokers, and Omkam Capital Markets. After conducting an inspection for the period from March to December 2019, the exchange expelled Modex International Securities in September 2020, on the charges of misuse of client funds and securities, a shortfall in networth, and non-settlement of client accounts, falsification of books, and non-resolution of investor complaints.
Besides, the capital markets regulator SEBI passed an interim order in April 2020, against Modex International Securities and its two directors for misusing clients’ funds and securities. Further, a confirmatory order was passed by the regulator in September 2020, in the matter. Moreover, a case has been pending against Modex International Securities in Delhi High Court.
In their plea to the court, 19 investors have alleged that the broker robbed off their precious, lifetime savings to the tune of Rs.28.5 crore and in addition deprived them of their future earnings in terms of dividends/ bonus/ buyback among others. These petitioners, mostly senior citizens, alleged that the overall size of the fraud is much bigger, about Rs.400 crore investors cheated an estimated Rs.300 crore.
[with PTI inputs]
Reference:
[1] ED arrests Karvy stock broking CMD Parthasarathy, CFO Hari in swindling of more than Rs.2874 crores of investors – Jan 27, 2022, PGurus.com
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