Sebi cancels merchant banking licence of Karvy Investor Services

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The Securities and Exchange Board of India (Sebi) has cancelled the registration of Karvy Investor Services after a regulatory enquiry found various non-compliances by the merchant banking entity.

In an order issued on Thursday, the capital markets regulator stated that the enquiry found that the firm, among other things, did not have adequate office space, and was also non-compliant with the minimum staff strength as laid down by the SEBI (Merchant Bankers) Regulations, 1992.

Further, the merchant banking firm also had a director who was involved in a litigation related to the securities market.

“… I find that by not having necessary infrastructure like adequate office space, equipment etc. and minimum two employees having the experience to conduct the business of merchant banker and having a director who is involved in a litigation connected with the securities market which has an adverse bearing on the business of the applicant and by not being fit and proper person, Noticee (Karvy Investor Services) is not meeting eligibility criteria…,” stated the Sebi order.

According to the Sebi probe, an onsite inspection of the firm found that it was not functioning/operational both at the registered as well as at the correspondence address.

An inspection report by Sebi further stated that the holding company of the merchant banking firm — Karvy Stock Broking Limited (KSBL) — and its common director are involved in litigation, which has an adverse bearing on the business of the merchant banking firm and hence it cannot be viewed as a fit and proper person.

Karvy Investor Services has not even paid the renewal fee for the period December 13, 2022 to December 12, 2025, stated the Sebi report.

Incidentally, Sebi had passed an ex-parte ad interim order against Karvy Investor Services on April 27, 2023 restraining the firm from taking any new clients or assignments until further orders.

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