SEBI final order bars Karvy Stock Broking, promoter for seven years

What the Record Shows

The Securities and Exchange Board of India passed a final order on 28 April 2023 barring Karvy Stock Broking Ltd (KSBL) and its promoter and managing director, Comandur Parthasarathy, from the securities market for seven years. SEBI imposed monetary penalties of Rs 13 crore on KSBL and Rs 8 crore on Parthasarathy - Rs 21 crore in all - and restrained Parthasarathy from holding any directorship or key managerial position in a listed public company or a SEBI-registered intermediary for ten years. SEBI also cancelled KSBL's certificate of registration as a stock broker.

This was a final adjudicated order, not an interim one. It followed an ex-parte interim order that SEBI had passed in November 2019, after which the National Stock Exchange and the BSE declared KSBL a defaulter and expelled it from membership in November 2020. In the final order, SEBI found that the firm had misused the power of attorney executed by its clients to move their securities, and it treated that conduct as a violation of the broker's obligations and of securities law.

SEBI subsequently moved to recovery. A recovery certificate, RC No. 6905/2023, was issued against Parthasarathy, and the SEBI Recovery Officer attached bank and demat accounts to enforce the dues, later releasing specific accounts as the recovery proceedings progressed. The order and the recovery steps together form the official record for this matter.

How It Worked

The mechanism below is what SEBI found in its orders. SEBI found that KSBL used the blanket power of attorney that retail clients routinely sign at account opening to transfer clients' fully paid-up securities out of their own beneficial-owner demat accounts and into an account controlled by the broker. Those client securities were then pledged with lenders to raise loans for the firm itself.

Per SEBI's findings, the loan proceeds were routed to group companies, including a group real estate arm. The regulator's orders record that securities were moved even from clients who had never traded with the firm and from accounts that had been dormant for months - holdings that were, in law, the clients' own property and not available to the broker to pledge. SEBI's case is that the firm's registered-broker status and the standard power of attorney were the instruments that made this access possible.

The scale figures widely associated with the matter - roughly Rs 2,000 crore of client securities pledged and funds diverted, including about Rs 1,096 crore said to have been transferred to a group realty company - come from the prima facie findings recorded in SEBI's November 2019 interim order, and should be read as such rather than as sums finally adjudicated in rupee terms. The procedural history is itself part of the record: in 2019 the Securities Appellate Tribunal had asked SEBI to review parts of the interim order before the final order followed in 2023.

Who Lost Money

The people whose assets were exposed were tens of thousands of ordinary broking clients whose fully paid shares - legally theirs - were, per SEBI's findings, pledged without their knowledge. Because the securities had been moved out of the clients' own accounts, the loss did not sit with traders who had taken a market risk; it sat with investors who simply held shares through the broker.

Recovery for affected clients was worked out over several years and through more than one channel. SEBI and the depository NSDL directed the reversal of pledged shares back to the beneficial owners, and the exchange investor protection framework was engaged for eligible claims. Reconstructing who was made whole, and when, is complicated by the competing claims of the lenders who had accepted the pledges.

Those competing claims produced a distinct proceeding. In December 2023 the Securities Appellate Tribunal, hearing appeals by lender banks, quashed the actions of SEBI, NSE and NSDL that had unwound the pledges in the clients' favour, and directed that the lenders be compensated over pledged shares valued in the region of Rs 2,300 crore. That dispute is separate from the enforcement order against KSBL and Parthasarathy, and it concerns who bears the loss as between the clients, the lenders and the market institutions.

Where It Stands Now

The 28 April 2023 final order is under appeal. Comandur Parthasarathy has challenged it before the Securities Appellate Tribunal in Appeal No. 723 of 2024. As of the tribunal's proceedings on 11 November 2025, the appeal remained pending with no substantive ruling and no stay of the order recorded; the matter was adjourned for hearing to 8 January 2026. Absent a stay, the enforcement order stands while the appeal is heard.

The separate lender-compensation litigation over the pledged shares continues on its own track, and SEBI's recovery proceedings against Parthasarathy - the recovery certificate and the attachment and release of specific accounts - remain live. Readers should treat the seven-year debarment and the Rs 21 crore penalty as the operative regulatory position today, subject to whatever SAT ultimately decides on the appeal.

Because a regulatory finding under appeal is not the same as a concluded matter, the appropriate framing is that SEBI has made an adjudicated finding, the affected party is contesting it through the statutory appeal route, and the tribunal has not yet ruled. SEBI's order is a securities-law finding, not a criminal conviction.

What It Means

This matter is the direct origin of the way client securities are protected today. In its wake, SEBI tightened the rules so that a broker can no longer freely move fully paid client securities into its own demat account, restricting the transfer of client securities and moving the market to a pledge and re-pledge system operated through the depositories, so that a pledge is visible to and authorised by the client. The Karvy record is, in effect, why those safeguards exist.

The concrete, non-alarmist takeaway for an investor is to use the tools that now make holdings visible. The consolidated account statement (CAS) sent by NSDL and CDSL lists the securities actually in your demat account; reviewing it, and being deliberate about the power of attorney signed at account opening, is how a client can confirm that fully paid shares remain in their own name. A power of attorney should authorise settlement, not a transfer of ownership.

The broader lesson across the enforcement archive at Oquilia's enforcement index is that a registered intermediary's credentials are a responsibility, not a guarantee - the same institutional standing that lets a firm serve clients is what can be misused, which is why disclosure, segregation of client assets and independent depository records matter. The pattern of impounding and recovery seen here recurs in later actions such as the Jane Street impounding order and the Avadhut Sathe Trading Academy order.

FAQ

Does this mean Karvy or its promoter is criminally guilty?

No. SEBI's order is an adjudicated finding under the SEBI Act - a regulatory determination, not a criminal conviction by a court. It is also under appeal before the Securities Appellate Tribunal, which has not yet ruled. The debarment and penalties are the operative regulatory position, but the appeal remains to be decided.

What exactly did SEBI order on 28 April 2023?

SEBI barred Karvy Stock Broking Ltd and its promoter-managing director Comandur Parthasarathy from the securities market for seven years, imposed penalties of Rs 13 crore on the firm and Rs 8 crore on the promoter, restrained him from directorship or key managerial roles for ten years, and cancelled the firm's broking registration.

What did SEBI find the firm had done?

SEBI found that the broker used the power of attorney signed by clients to transfer their fully paid-up securities into a broker-controlled account and pledged those securities with lenders to raise loans for itself, routing proceeds to group companies. The larger rupee figures associated with the case come from SEBI's 2019 interim order's prima facie findings.

Is the order still in force?

As of the tribunal's proceedings on 11 November 2025, Comandur Parthasarathy's appeal (No. 723 of 2024) was pending before SAT with no stay recorded, and was adjourned to 8 January 2026. Absent a stay, SEBI's final order stands while the appeal is heard.

Have affected clients got their securities back?

SEBI and the depository NSDL directed the reversal of pledged shares to their beneficial owners, and the exchange investor protection framework was engaged for eligible claims. A separate SAT ruling in December 2023 directed that lender banks be compensated over the pledged shares, so the allocation of loss between clients, lenders and institutions has been litigated in its own proceedings.

How can I check my own shares are safe with a broker?

Review the consolidated account statement (CAS) that NSDL and CDSL send, which shows the securities actually held in your demat account, and understand the power of attorney you sign at account opening - it should authorise settlement, not a transfer of your holdings. SEBI's post-Karvy rules now require client securities to stay in the client's account, with pledges visible through the depositories.

This report is based on the SEBI final order dated 28 April 2023 in the matter of Karvy Stock Broking Limited and the pending Securities Appellate Tribunal appeal No. 723 of 2024, reviewed on 29 July 2026.