Sebi imposes Rs 10-lakh fine on Karvy Financial Services for not making open offer timely

Markets regulator Sebi has levied a fine of Rs 10 lakh on Karvy Financial Services Ltd for the delay in making a public announcement to acquire shares of Regalia Realty Ltd.

''...by not making the mandatory public announcement within the stipulated time period the Noticee has violated the statutory requirements of law and accordingly, the Noticee has to be penalized for the same,'' Sebi said.

Karvy Financial made a public announcement for an open offer with a delay of 81 days, in violation of Substantial Acquisition of Shares and Takeovers (SAST) norms.

The probe found that Karvy had extended a loan amount of Rs 7 crore to Regaliaa whose promoters had pledged 55.56 percent of the paid-up share capital in favor of Karvy, in addition to the securities for availing the loan.

Karvy invoked the pledge as the firm defaulted on payment of installments. This took its shareholding in the company to 55.56 percent, thereby breaching the threshold of 25 percent as stipulated under SAST norms.

Sebi then directed Karvy in October 2016 to make the public announcement to acquire shares of the target company within 45 days.

However, aggrieved by the regulator's order, Karvy filed an appeal before the Securities Appellate Tribunal which was dismissed in April 2018, thereby reaffirming Sebi's decision.

Accordingly, it was required to make the public announcement within 45 days from the date of the tribunal's order but it made the announcement only in August 2018, with a delay of 81 days.

In a separate order on Wednesday, Sebi has disposed of enforcement proceedings against the depositories -- CDSL and NSDL.

The order came after Sebi inspected to ascertain whether the depositories had conformed with the share reconciliation-related responsibility.

Sebi, while disposing of the matter, noted that the case of violation of market norms against the depositories does not stand established.