While noting Karvy Computershare was liable to be restricted from acting as an RTI (Registrar to Issue and Share Transfer Agent) for a period of nine months, Sebi said the entity has already undergone prohibition for approximately 10 months.
In view of the same, no further penalty is warranted, the regulator said in an order. Karvy said in a statement that since it has already undergone the period of prohibition, there will be no disruption in the normal functioning of the company.
It added: Over the last few years, Karvy has beefed up its systems & processes to prevent such situations in future.
Sebi had initiated a probe noticing certain irregularities with respect to IPO of different companies including IDFC. Sebi had found that RTI had extended special treatment to the Karvy group companies comprising Karvy Stock Broking (Stock Broker, Depository Participant and Portfolio Manager), Karvy Consultants (formerly Non-Banking Finance Company) and enabled the key operators to corner the shares meant for retail investors in the IPO allotment.
It said: Karvy Computershare was giving preferential treatment to the IPO applications which came through other Karvy group entities, and this enabled the key operators in cornering of the shares in various IPOs.
It can be said that the company had failed to maintain arm-length distance with its group entities that were active in different businesses in the securities market and was aware of the activities of the group companies. Accordingly, Sebi said, The acts and conduct of KCPL are unfair and fraudulent thus violating the provisions of the PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) Regulations.