Sebi Clears Karvy Capital of AIF Regulation Breaches

Securities regulator Sebi has dismissed a show cause notice against Karvy Capital and its key personnel for alleged violations of AIF rules, after determining no breaches occurred. Despite KSBL's disqualification, legal constraints prevented divestment, but Karvy complied with all disclosure requirements, leading to Sebi's decision.

The Securities and Exchange Board of India (Sebi) has exonerated Karvy Capital Ltd and its executives from allegations of breaching alternative investment fund (AIF) regulations. The decision comes post an inquiry into compliance standards of the Karvy group AIFs, which included Karvy Capital Alternative Investment Trust and KCAP Alternative Investment Fund.

The investigation centered around evaluating if these entities met the 'fit and proper' criteria, following suspicions raised by non-compliance accusations. Sebi had initially issued a show cause notice to officials including Ajit Bhaskaran, Hitungshu Debnath, and K P Jeewan in June 2024, demanding explanations for the suspected violations.

Despite the serious allegations, the regulatory board found mitigating factors, such as Karvy Capital's inability to divest KSBL's stake due to legal impediments, and no active investment in its AIFs. Concluding that the accused had not willfully violated market rules, Sebi has dismissed the charges without any financial penalties.

(With inputs from agencies.)