Page 1 of 35 KARVY STOCK BROKING LIMITED PORTFOLIO MANAGEMENT SERVICES DISCLOSURE DOCUMENT [As required under Regulation 14 of SEBI (Portfolio Managers) Regulation, 1993] 1. This document supercedes the Disclosure document dated February 18, 2019 , filed with Securities and Exchange Board of India (SEBI) on February 18, 2019 2. This Disclosure Document has been filed with SEBI along with the certificate from independent chartered accountant in the prescribed format in terms of Regulation 14 of the SEBI (Portfolio Managers) Regulations, 1993 as amended till date. 3. The purpose of this Disclosure Document is to provide essential information about the portfolio management services offered by Karvy Stock Broking Limited in such manner as to assist and enable the investors in making informed and considered decision for engaging Karvy Stock Broking Limited as a Portfolio Manager. 4. This document contains the necessary information about the Portfolio Manager required by an investor. 5. Karvy Stock Broking Limited is permitted to provide Portfolio Management Services pursuant to its registration as a portfolio manager with SEBI vide Registration number INP000001512 dated November 1, 2005 which registration shall be valid unless it is suspended or cancelled by SEBI and is subject to payment of renewal fees to SEBI from time to time. 6. Investors should carefully read this entire document before making a decision to avail portfolio management services from Karvy Stock Broking Limited and retain this document for future reference. Any other relevant information may be provided upon request. 7. No person has been authorized to give any information or to make any representations not confirmed in this Disclosure Document in connection with the services proposed to be provided by the Portfolio Manager, and any information or representations not contained herein must not be relied upon as having been authorized by the Portfolio Manager. 8. The Principal Officer designated by Karvy Stock Broking Limited, the Portfolio Manager is: Name of the Principal Officer VIKAS RAJPAL* Tel No: 022 61491606 Email : [email protected]Address: 701, Hallmark Business Plaza, Sant Dnyaneshwar Marg, Bandra (E), Mumbai 400 051
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Page 1 of 35
KARVY STOCK BROKING LIMITED
PORTFOLIO MANAGEMENT SERVICES
DISCLOSURE DOCUMENT
[As required under Regulation 14 of SEBI (Portfolio Managers) Regulation, 1993]
1. This document supercedes the Disclosure document dated February 18, 2019 , filed with
Securities and Exchange Board of India (SEBI) on February 18, 2019
2. This Disclosure Document has been filed with SEBI along with the certificate from independent
chartered accountant in the prescribed format in terms of Regulation 14 of the SEBI (Portfolio
Managers) Regulations, 1993 as amended till date.
3. The purpose of this Disclosure Document is to provide essential information about the
portfolio management services offered by Karvy Stock Broking Limited in such manner as to
assist and enable the investors in making informed and considered decision for engaging Karvy
Stock Broking Limited as a Portfolio Manager.
4. This document contains the necessary information about the Portfolio Manager required by an
investor.
5. Karvy Stock Broking Limited is permitted to provide Portfolio Management Services pursuant
to its registration as a portfolio manager with SEBI vide Registration number INP000001512
dated November 1, 2005 which registration shall be valid unless it is suspended or cancelled by
SEBI and is subject to payment of renewal fees to SEBI from time to time.
6. Investors should carefully read this entire document before making a decision to avail portfolio
management services from Karvy Stock Broking Limited and retain this document for future
reference. Any other relevant information may be provided upon request.
7. No person has been authorized to give any information or to make any representations not
confirmed in this Disclosure Document in connection with the services proposed to be
provided by the Portfolio Manager, and any information or representations not contained
herein must not be relied upon as having been authorized by the Portfolio Manager.
8. The Principal Officer designated by Karvy Stock Broking Limited, the Portfolio Manager is:
Ii Complete disclosure in respect of transactions with related
parties as per the standards specified by the Institute of
Chartered Accountants of India as on March 31,2019
20 -24
8 Financial Performance of Portfolio Manager, Karvy Stock Broking
Limited
24 – 25
9 Portfolio Management Performance of the Portfolio Manager for
last 3 years
25 – 28
10 Nature of Expenses 28 – 29
11 Taxation 29
12 Accounting Policies 32 – 34
13 Investor Services 34
14 Grievances Redressal 34 - 35
15 Dispute Settlement Mechanism 35
16 General 35
Page 4 of 35
Section 1: DISCLAIMER
This document has been prepared in accordance with the Securities Exchange Board of India (Portfolio
Managers) Regulations, 1993, as amended from time to time and other circulars issued by SEBI from
time to time and has been filed with SEBI. This Document has neither been approved nor disapproved
by SEBI nor has SEBI certified the accuracy or adequacy of the contents of this Document.
This information is not for public distribution and has been furnished to you solely for your information
and may not be reproduced or redistributed to any other person.
Section 2: DEFINITIONS
In this Agreement, unless otherwise clearly indicated by or inconsistent with the context, the following
expressions shall have the meaning assigned to them hereunder respectively:
“Act” – means the Securities and Exchange Board of India Act, 1992.
“Agreement” means the agreement entered between Karvy Stock Broking Limited, the Portfolio
Manager and the client for the management of funds or securities of the client in terms of Regulation
14 of the SEBI (Portfolio Managers) Regulations, 1993 and SEBI (Portfolio Managers) Amendment
Regulations, 2002 issued by the Securities and Exchange Board of India and as may be modified from
time to time and shall include all schedules and annexures thereto and shall also include all
modifications, alterations, additions or deletions made thereto in accordance with the terms thereof.
“Board” means the Securities and Exchange Board of India.
“Bank Account” means one or more bank accounts opened, maintained and operated by the Portfolio
Manager in the name of clients or a pool account in the name of the Portfolio Manager in which the
funds handed over by the client shall be held by the Portfolio Manager on behalf of the Client.
“Chartered Accountant” means a chartered accountant as defined in clause (b) of sub-section (1) of
section 2 of the Chartered Accountants Act, 1949 (38 of 1949) and who has obtained a certificate of
practice under sub-section (1) of section 6 of that Act.
“Client” means any body corporate, partnership firm, Limited Liability Partnership, individual, HUF,
association of person, body of individuals, trust, statutory authority, or any other person who enters
into agreement with the Portfolio Manager for availing the Portfolio Management Services
“Custodian” means any person who carries on or proposes to carry on the business of providing
custodial services in accordance with the regulations issued by SEBI from time to time.
“Depository” means Depository as defined in the Depositories Act, 1996 (22 of 1996) and currently
includes National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited
(CDSL).
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“Depository Account” means any account of the client or for the client with an entity registered as
depository participant under sub-section 1A of Section 12 of the Act or any other law for the time being
relating to registration of depository participants in which the securities comprising part of the
Portfolio of the Client are kept by the Portfolio Manager.
“Discretionary Portfolio Management Services” means the discretionary portfolio management
services rendered to a Client by the Portfolio Manager pursuant to the terms and conditions contained
in the Portfolio Management Services Agreement, where under the Portfolio Manager exercises
absolute and unfettered discretion, with regards to the investments and management of the portfolio
of securities or the funds of the client, as the case may be.
“Disclosure Document” means this disclosure document for offering Portfolio Management Services.
“Financial year” means the period of twelve months commencing on 1st April every year and ending on
31st March of the following year.
“Funds” means the monies placed by the Client with the Portfolio Manager and any accretions thereto
and also includes any further monies placed by the client with the Portfolio Manager to be managed
pursuant to the Agreement, the proceeds of the sale or realization of the portfolio and any other
monies so long as the same is being managed by the Portfolio Manager.
“Funds managed” means the market value of the Portfolio of the Client as on date.
“Fund Manager” (FM) means the individual/s appointed by the portfolio manager who manages,
advises or directs or undertakes on behalf of the client (whether as a discretionary portfolio manager
or otherwise) the management or administration of a portfolio of securities or funds of the client, as
the case may be.
“Initial Corpus” means the value of the funds and the market value of securities brought in by the
client and accepted by the Portfolio Manager at the time of registering with the Portfolio Manager for
the portfolio management services. The Initial corpus brought in by the Client in the form of securities
shall be valued at the closing market price of such securities, prevailing on recognised stock exchange
[NSE/ BSE (only if security is not listed on NSE)] on the previous working date of activation of client’s
portfolio management account by the Portfolio Manager or of the previous working day of the transfer
of such securities from client’s account to the Depository account whichever is later. The Portfolio
Manager shall not accept from the client/ client(s) , in case of joint holding funds or securities worth
less than Twenty five lakh rupees.
“Investment Advisory Services” means the non exclusive, non binding services, where the Portfolio
Manager advises Clients on investments in general or gives specific advice required by the Clients as
agreed upon in the Agreement. Advice, whether general or specific is non-binding in nature and it is
entirely at client’s discretion to follow the advice
“Non-Discretionary Portfolio Management Services” means the non-discretionary portfolio
management services to be rendered to a Client by the Portfolio Manager on the terms and conditions
pursuant to the Agreement, where under the Portfolio Manager invests and manages the Funds of the
Client based on the instructions of the Client.
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“Net Asset Value” or “NAV” means the market value of the Assets managed by the Portfolio Manager,
as calculated by the Portfolio Manager from time to time, depending on the Strategy chosen by the
Client.
“Person directly or indirectly connected” means Related Parties as defined under section 2(76) of the
Companies Act, 2013 - “Related Party” with reference to a company, means—
(i) a director or his relative;
(ii) a key managerial personnel or his relative;
(iii) a firm, in which a director, manager or his relative is a partner;
(iv) a private company in which a director or manager is a member or director;
(v) a public company in which a director or manager is a director or holds along with his relatives, more than two per cent. of its paid-up share capital;
(vi) any body corporate whose Board of Directors, managing director or manager is accustomed to act in accordance with the advice, directions or instructions of a director or manager;
(vii) any person on whose advice, directions or instructions a director or manager is accustomed to act:
Provided that nothing in sub-clauses (vi) and (vii) shall apply to the advice, directions or instructions given in a professional capacity;
(viii) any company which is—
A. a holding, subsidiary or an associate company of such company; or
B. a subsidiary of a holding company to which it is also a subsidiary;
(ix) such other person as may be prescribed;
“Portfolio” means the total holdings of securities and / or funds belonging to the client.
“Portfolio Manager” (PM) means Karvy Stock Broking Ltd., a company incorporated under the
Companies Act, 1956 and registered with SEBI as a Portfolio Manager in terms of SEBI (Portfolio
Managers) Regulations 1993 vide registration No.INP000001512 and having its Registered Office at
Karvy House, 46, Avenue 4, Road No.10, Banjara Hills, Hyderabad and its PMS dealing office at 701,
Hallmark Business Plaza, Sant Dnyaneshwar Marg, Bandra (E), Mumbai 400 051[ but may add more
dealing offices in future] and who pursuant to a contract or arrangement with a client, advises or
directs or undertakes on behalf of the client (whether as a discretionary Portfolio Manager or
otherwise) the management or administration of a portfolio of securities or the funds of the client, as
the case may be.
“Portfolio Management Services” means the Discretionary Portfolio Management Services, and/or the Non-Discretionary Portfolio Management Services, and/or the Investment Advisory Services, as the case may be. “Portfolio Value” means the aggregate of the Portfolio Funds and Value of Portfolio Securities.
Page 7 of 35
“Principal Officer” means a director/an employee of the portfolio manager who is responsible for the
activities of portfolio management and has been designated as principal officer by the portfolio
manager.
“Regulations” – means the Securities and Exchange Board of India (Portfolio Managers) Regulations,
1993, as amended by SEBI from time to time and includes Securities and Exchange Board of India
(Portfolio Managers) Amendment Regulations, 2012, and rules, guidelines or circulars issued in relation
thereto from time to time.
“Strategy” means any of the Portfolio Investment categories mentioned herein or that may be
introduced by the Portfolio Manager from time to time. The Term Strategy may be interchanged with
Plans/Products/Options.
“SEBI” means the Securities and Exchange Board of India established under sub-section (1) of Section 3
of the Securities and Exchange Board of India Act, 1992.
“Securities” means and includes shares (whether dematerialized or otherwise), derivatives (futures
Note: Portfolio Management performance of Resident Individual and Non Resident Indian have been
shown separately above effective April 1, 2011.
Section 10: NATURE OF EXPENSES
The following are the general costs and expenses to be borne by the Client availing the services by the
Portfolio Manager. However, the exact nature of expenses relating to each of the following services is
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provided in the annexure to this Risk Disclosure Document and in the Schedule of Charges signed by
the client in respect of each of the services provided.
(i) Portfolio Management and Advisory Fees
This fee relates to the portfolio management services offered by Portfolio Manager (including advisory
services) to the clients. The fee may be a Fixed Charge on the quantum of the funds being managed
(or) charges linked to portfolio return (or) combination of both. For details kindly refer the annexure to
this Risk Disclosure Document.
(ii) Premature Redemption Charges
If the redemption is done prematurely at the option of the client, the Portfolio Manager shall levy the
Premature Redemption Charges. For details kindly refer the annexure to this Risk Disclosure Document.
(iii) Custodian/Depository Participant fee
The charges relating to opening and operation of demat accounts, custody and transfer charges for
shares, bonds and units, dematerialization and rematerialization, pledge and removal of pledge, etc.
will be as per the actual charged by the Depository Participant/Custodian. For details kindly refer the
annexure to this Risk Disclosure Document.
(iv) Registrar and transfer agent fee
Charges payable to the Registrar and Share Transfer Agents in connection with effecting transfer of
securities and bonds, units, etc. including stamp charges, cost of affidavits, notary charges,
postage/courier charges and other related charges will be recovered on actual. For details kindly refer
the annexure to this Risk Disclosure Document.
(v) Placement fee :
A Placement fee will be charged as a percentage of corpus over and above the fixed management fee
and performance fee. The placement fee shall also be charged each time corpus is infused/ brought in
by the client during the lifetime of the portfolio investment. The placement fee shall be computed as a
percentage of the initial corpus brought in by the client and if subsequent to account opening,
additional corpus brought in by such client then it shall be computed as a percentage of the additional
corpus brought in. The Placement fee shall be deducted upfront from the Client’s portfolio immediately
on receiving the corpus from the client. For details kindly refer the annexure to this Risk Disclosure
Document.
(vi) Brokerage and transaction cost
The Brokerage and other charges like Goods and Services Tax, Stamp duty, Security Transaction
Tax, SEBI Fees, Bank charges, Turnover tax, and other charges (if any), as per the rates existing from
time to time, will be charged on actual. For details kindly refer the annexure to this Risk Disclosure
Document.
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The investment by Portfolio Manager will be done through Karvy Stock Broking Limited {Stock Broker}
or through any SEBI Registered stock broker only and would as per the rates negotiated between
Portfolio Manager and such stock broker. The charges relating to brokerage as per the related party
transactions charged by Karvy Stock Broking Limited or through any SEBI Registered stock broker will
be recovered on actual by the Portfolio Manager
(vii) Securities Lending Charges
If utilized, the charges pertaining to lending of securities, costs associated with transfer of securities
connected with lending transfer operations, Depository Participant Charges, Share Transfer Agent
Charges, etc. would be recovered on actual. For details kindly refer the annexure to this Risk Disclosure
Document.
(viii) Certification Charges or Professional Charges
Any charges payable for outsourced professional services like accounting, taxation, auditing, and any
legal services, notarizations, etc., incurred on behalf of the Client by the Portfolio Manager, will be
charged from the client on actual. For details kindly refer the annexure to this Risk Disclosure
Document.
(ix) Incidental Expenses
Charges in connection with day to day operations like courier charges incurred in providing physical
reports relating to client’s portfolio / welcome letter / other communication to clients , stamp duty,
Goods and Services Tax, postal, telegraphic expenses, opening and operation of bank and demat
accounts or any other out of pocket expenses incurred by the Portfolio Manager, on behalf of the
client, would be recovered from the client. For details kindly refer the annexure to this Risk Disclosure
Document.
Note: For clients who have opened their PMS account with Karvy Stock Broking Limited prior to August
1, 2012, the performance fee will be computed on a High Watermark Principle over the life of the
Investment at the end of every financial year on financial year basis. However, for clients who have
opened their PMS accounts on or after August 1, 2012, the performance fees will be charged on
completion of 12 months from account opening date (anniversary basis) and not financial year basis.
The actual charges levied to client portfolio under these heads can be seen in the client’s Profit and
Loss statement which will be shared by Portfolio Manager with the client on annual basis
Section 11: TAXATION
General
It may be noted that the information given hereinafter is only for general information purposes and is
based on the advice received by the Portfolio Manager regarding the law and practice currently in force
in India and the Investors should be aware that the relevant fiscal rules or their interpretation may
change or it may not be acceptable to the tax authorities. As is the case with any interpretation of any
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law, there can be no assurance that the tax position or the proposed tax position prevailing at the time
of an investment in the strategy/plan/option will be accepted by the tax authorities or will continue to
be accepted by them indefinitely.
Further statements with regard to tax benefits mentioned herein below are mere expressions of
opinion and are not representations of the Portfolio Manager to induce any investor to invest whether
directly from the Portfolio Manager or indirectly from any other persons by the secondary market
operations. In view of the above, and since the individual nature of tax consequences may differ in
each case on its merits and facts, each Investor is advised to consult his / her or its own professional
tax advisor with respect to the specific tax implications arising out of its participation in the PMS
strategy/plan/option, as an investor.
In view of the above, it is advised that the investors appropriately consult their investment / tax
advisors in this regard.
Portfolio Manager cannot be held responsible for assisting or completing the fulfillment of the client’s
tax obligations.
Income arising from purchase and sale of securities under Portfolio Management Services can give rise to business income or capital gains in the hands of the Client. The issue of characterization of income is relevant as the tax computation and rates differ in either of the two situations. The said issue is essentially a question of fact and depends on whether the shares are held as business trading assets or on capital account. Based on judicial decisions, the following factors need to be considered while determining the nature of assets as above:
a. Motive for the purchase of securities
b. Frequency of transactions
c. Length of period of holding of the securities
d. Treatment of the securities and profit or loss on their sale in the accounts of the assessee and disclosure in notes thereto
e. Source of funds out of which the securities were acquired - borrowed or own
f. Existence of an objects clause permitting trading in securities – relevant only in the case of corporate.
g. Circumstances responsible for the sale of securities
h. Acquisition of the securities -from primary market or secondary market Infrastructure and set - up employed for undertaking the securities transactions by the client
Any single factor discussed above in isolation cannot be conclusive to determine the exact nature of the shares. All factors and principles need to be construed harmoniously.
Investors may refer to CBDT instruction no. 1827 dated August 31, 1989 read with CBDT Circular no. 4 dated June 15, 2007 for further guidance on the matter.
Tax implications under the Income Tax Act, 1961 ("IT Act") arise in the hands of the Clients (resident as
well as the non-resident) under both the scenarios, viz:
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a. Securities in the Portfolio held as business asset; and
b. Securities in the Portfolio held on capital account.
Additionally, non-residents (including Flls) are entitled to be governed by the applicable Double Tax
Avoidance Agreement ("DTAA), which lndia has entered into with the country of residence of the non-
resident, if that is more beneficial. The same would have to be considered on a case-to-case basis
depending upon the applicable DTAA. Ordinarily, capital gains and interest income are taxable in lndia
in the manner and at the rates prescribed under the relevant DTAA or the relevant rates applicable in
India, whichever is beneficial to the assessee. Further, business income is normally not taxable in lndia
if there is no permanent establishment of the non-resident in India.
Tax Deducted at Source
Presently, tax is withheld at source for non-residents. If any tax is required to be withheld on account
of any future legislation, Portfolio Manager shall be obliged to act in accordance with the regulatory
requirements in this regard. Interest and dividends would be subject to tax as per the provisions of the
Income Tax Act, 1961.
Advance Tax installment obligations
It shall be the client’s responsibility to meet the advance tax obligation installments payable on the due
dates under the Income Tax Act, 1961.
Long Term capital Gains
Any investments (equity share in a company or a unit of an equity oriented fund) held for 12 months or
more than 12 months would be classified as Long Term Capital Assets. Gains arising out of such assets
are called Long Term Capital Gains. These were exempt from capital gains tax, provided the shares are
sold on a recognized stock exchanges in India and such transactions are subjected to Securities
Transaction Tax (‘STT’) in accordance with Chapter VII of the Finance (No.2) Act, 2004 and/or Income
Tax Act, 1961. With effect from 1st April 2017, in the case of equity shares, in terms of proviso to
Section 10(38) of the Income Tax Act, 1961 inserted vide Finance Act, 2017, equity shares acquired on
or after 1st October’ 2004 (other than the acquisition notified by the Central Government), exemption
shall be admissible only if STT was also paid at the time of acquisition of such equity shares. Finance
Bill, 2018 has withdrawn the above exemption and thus vide Section 112A of the Income Tax Act, 1961
tax on such long term capital gains exceeding one lakh rupees is leviable at the rate of 10%. Clients
are requested to check with their Tax Advisor on the applicable rates of tax, STT, surcharge and health
and educational cess at any given point of time.
Short Term Capital Gains
Any investments held for less than 12 months would be classified as Short Term Capital asset and any
gains arising out of such investment are called Short Term Capital Gains. Such gains would be added to
the total income. With effect from 1st April 2008, as per Section 111A of the Finance (No.2) Act, 2004,
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short term capital gains arising on transfer of short term capital asset (equity shares in a company or a
unit of an equity oriented fund) are subject to tax @ 15% plus applicable surcharge and educational
cess, provided the shares are sold on a recognized stock exchange in India and such transactions are
subjected to Securities Transaction Tax in accordance with Chapter VII of the Finance (No.2) Act, 2004
and/or Income Tax Act, 1961. Clients are requested to check with their Tax Advisor on the applicable
rates of tax, STT, surcharge and educational cess at any given point of time.
Securities Transaction Tax
STT is the tax leviable on the taxable securities transactions i.e. transaction of:
(a) Purchase or sale of an equity share of a listed companies (whether delivery based or non-delivery
based) or a derivative or a unit of an equity oriented fund, entered into in a recognized stock exchange;
or
(b) Sale of a Unit of an equity oriented fund to the Unit Trust of India or Mutual Fund.
The income arising from the securities transactions shall be taxed at applicable rates under the Income
Tax Act, 1961 if STT is not applicable in respect of such transactions.
Capital loss
Losses under the head 'capital gains' cannot be set off against income under any other head. Further,
within the head 'capital gains', long-term capital losses cannot be adjusted against short-term capital
gains. However, short-term capital losses can be adjusted against any capital gains. Unabsorbed long-
term capital loss can be carried forward and set off against the long-term capital gains arising in
subsequent eight assessment years. Unabsorbed short-term capital loss can be carried forward and set
off against the income under the head capital gains in subsequent eight assessment years
Section 12: ACCOUNTING POLICIES
The following is the accounting policy followed by Portfolio Manager while accounting for the portfolio
investments of the clients.
Investment in equities will be valued on the closing price of that equity at NSE. In case of any
investments done in any equity listed on BSE only, the same will be valued based on the closing price of
that equity in BSE. In case the prices are not available from NSE or BSE Stock exchange, then any other
stock exchange shall be considered. These shall include the Equity shares including Indian Depository
Receipts and other instruments, as the case may be. In case a share is not traded on a valuation date,
latest closing price of either principal / secondary or any other stock exchange would be used.
Equity shares which are not listed on stock exchanges are included in portfolio valuation at fair/cost
value. In case an Equity share is suspended/non-traded/ awaiting Corporate Actions, then the
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Valuation of such Equity share shall be done on the basis of good faith relying upon prevailing practices
elsewhere.
In case of the warrants been traded separately they would be valued as an equity share and valued
accordingly. In case of the non traded warrants, the warrants will be valued at the value of the share
which would be obtained on exercise of the warrant less the amount payable on exercise of the
warrant. On exercise of warrant, the warrants would be transferred to the normal equity and valued
accordingly.
For valuation of the derivatives contract, the open positions, as on the date of valuation, shall be
valued as per the last traded prices available from the relevant stock exchange, and will be valued on
the mark to market method.
In case of Mutual Fund, Investments in Mutual Funds shall be valued at the latest available NAV of the
respective scheme. Investment in Exchange listed (ETF) shall be valued at the closing price on the
relevant exchange. If on a valuation date Exchange Traded Funds (ETF) is not traded either on the
primary or secondary stock exchange, ETF shall be valued at the latest available NAVs of the ETF
Scheme.
Investment in debt instruments will be valued at the market value of the debt instrument as on cut-off
date (or) the latest available price on the relevant exchange or the most recent NAV will be reckoned.
For illiquid securities, the valuation may be provided by the issuer on a periodic basis and/or as
required by the portfolio manager.
Realised gains/losses will be calculated on the basis of First in First out (FIFO) basis.
Transaction date will be the trade date and not the settlement or auction date.
For derivatives transactions (if any), the unrealized gains/losses on open position will be calculated on
the mark to market method.
Unrealized gain/losses means the profit/loss not yet booked and the same will be the difference of the
current market price or NAV minus the actual purchase price (or) the historical cost of the securities.
All income will be accounted on accrual or receipt basis, whichever is earlier. All expenses will be
accounted on due or payment basis, whichever is earlier.
Purchase and sale transactions are accounted for on trade date basis.
Cost of purchase and sale includes consideration for scrip and brokerage but excludes Securities
Transaction Tax, Goods and Service Tax & other charges paid on purchase/sale of securities. Other
expenses like Custodian charges (Safe keeping charges, Transaction charges, Fund Accounting charges,
Out of Pocket expenses) are accounted for as & when debited by the Custodian.
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Any corporate benefits like dividend on shares, Mutual Fund units, interest on debt instruments, stock
lending fees etc. shall be accounted on accrual basis except interim dividend which would be
accounted on receipt basis.
Bonus shares are recorded on the ex-benefit date (ex-date). Dividend income is recorded on the ex-
dividend date (ex-date)
Tax deducted at source [TDS] on interest on instruments like debentures, Fixed Deposits and the like.
/Dividend is considered as withdrawal of corpus and debited accordingly. Hence, in case TDS has been
deducted, for the purpose of calculation of profit made by the investor, the TDS amount will be added
back. This profit arrived at (after adding back the TDS amount) will be used to calculate the applicable
performance sharing fee.
Portfolio Manager and the Client, on case to case basis, can mutually agree to any specific norms or
methodology for valuation of investment and/or accounting
The Client may contact the Portfolio Manager for the purpose of clarifying or elaborating on any of the
above.
Section 13: INVESTOR RELATIONS OFFICER – IRO
The below mentioned employee has been nominated as the Investor Relations Officer by Portfolio
Manager who will attend to the investor queries and complaints:
Ms. Nikita Sanghvi Karvy Stock Broking Ltd. 701, Hallmark Business Plaza, Sant Dnyaneshwar Marg, Bandra (E), Mumbai 400 051. Tel No. (B) 022-33055000 Tel No. (D) 022 61491675
currencies, Secured Premium Notes, money market instruments, etc. for those investors
who want returns linked to an underlying asset with a predefined level of capital
protection.
These products may be principal or non principal protected.
Investments may be made both in rated and unrated debentures to cater to specific
Client requirement.
Investments in such products will be made in consultation with and as per directions or
consent of the client.
Minimum investment amount is Rs. 25 Lakhs.
4. Structured
product
The Structured products are designed for those investors who want returns linked to
price movement of any Equity index, basket of stocks, commodities, precious metals,
etc., with a predefined level of capital protection.
Structured Products may be principal or non principal protected or may not have any
protection at all. Investments will be made in the structured products in consultation
with and as per directions or the consent of the client.
Minimum investment amount is Rs. 25 Lakhs.
The list of products provided here is not exhaustive and the Portfolio Manager may devise and recommend other products as per specific needs of the client.
Asset Allocation
The Portfolio will be invested in Equities, Mutual Funds, Exchange Traded Funds, Non Convertible Debentures,
Bonds, Debt Instruments, Derivatives, Money market Instruments and Structured products in consultations
with and as per directions or consent of the client. The cash in the portfolio will be invested in Liquid Funds or
Liquid Bees.
Valuation of Assets
Investment in equities will be valued on the closing price of that equity at NSE. In case of investments in any
stocks listed on BSE only, the same will be valued based on the closing price of that equity in BSE. Investment
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in NCDs, bonds and other debt Instruments will be valued at closing price, if listed, or as per valuation
provided by the issuer. Investment in “Futures and Options”, used for hedging, shall be valued at actual cash
margins paid against F&O contracts, summed with Mark to Market profit / loss computed on the basis of
closing price of such contracts.
Structured Products will be valued at the valuation provided by the issuer of the structured products from
time to time.
Non - Discretionary Portfolio Management Services
Customised Growth Portfolio
Introduction
This portfolio is designed for those investors who seek aggressive capital appreciation from their asset
allocation to equity, debt and gold. The portfolio will invest in stocks across sectors, market capitalization
categories and investment themes. Customised Growth Strategy caters to different investor mandates with
varying objectives and constraints. Each portfolio is unique and addresses the individual circumstances of the
client and hence does not follow a model portfolio. Customised Growth strategy follows an active
management style with close monitoring and review of portfolio positions. The Customised Growth Portfolio
was formerly known as Alpha Portfolio until January 31, 2014.
The Customised Growth Portfolio serves various kinds of investment mandates such as diversification,
focused, profit booking, etc and follows an active management style with close monitoring and review of
portfolio positions.
Investment Objective
The investment objective is to provide returns and capital appreciation through broad based participation in
equity markets with investments in companies which have sustainable business model, good corporate
governance and high growth.
Asset Allocation
Assets will be allocated amongst following asset classes in consultation with and as per directions or consent
of the client.
The amount of Portfolio invested in Equity will be between 0% - 100% of the Portfolio.
Investment can be made in other asset classes like debt, Gold ETF as per choice, consent or directions of the
client.
Securities
Investments will be made in Stocks and other investment options like Mutual Funds, Exchange Traded Funds
(ETF) as per choice, consent or direction of the client.
Investment in equities will be valued on the closing price of that equity at NSE. In case of investments in any
stocks listed on BSE only, the same will be valued based on the closing price of that equity at BSE. Investment
in Mutual Funds and ETFs will be valued on the day end’s NAV Investment.
Page | 12
Optima Portfolio The Optima Portfolio is designed for those investors who seek capital appreciation from their asset allocation
to Equities, debt, preference capital and gold.
Investment Objective
The investment objective of the Strategy is to generate capital appreciation of wealth through a portfolio of
debt, preference capital, pass through certificates, Equity and Gold securities which is rebalanced regularly
and the allocation between Debt, Equity and Gold ETFs is done on the basis of the risk profile of the investor in
consultation with and as per directions or consent of the client.
Asset Allocation
Assets will be allocated amongst following asset classes in consultation with and as per directions or consent
of the client.
The amount of Portfolio invested in Equity will be between 0% - 100% of the Portfolio.
The amount of Portfolio invested in Debt will be between 0% - 100% of the Portfolio.
The amount of Portfolio invested in Gold ETFs will be between 0% - 100% of the Portfolio.
Investment can be made in other asset classes as per choice, consent or directions of the client.
Securities
Investments will be made in Stocks, Mutual Funds, Exchange Traded Funds (ETF), Non-Convertible
Debentures, and Bonds, preference capital (perpetual, optionally convertible, compulsorily redeemable), pass
through certificates and other investment options as per choice, consent or direction of the client.
Investment in equities will be valued on the closing price of that equity at NSE. In case of investments in any
stocks listed on BSE only, the same will be valued based on the closing price of that equity at BSE. Investment
in Mutual Funds and ETFs will be valued on the day end’s NAV Investment in NCDs, bonds and other debt
Instruments will be valued at closing price, if listed, or as per valuation provided by the issuer.
Omega Portfolio
The Omega Portfolio is designed for those investors who seek long-term capital appreciation from their asset
allocation to equities, debt, gold and other asset classes which are available through either exchange traded
products or through mutual funds.
Investment Objective
The investment objective of the Strategy is to generate long term capital appreciation of wealth through a
portfolio of debt, equity, gold ETFs and other asset classes which are available through either exchange traded
products or through mutual funds and the allocation amongst the asset classes is done on the basis of the risk
profile of the investor in consultation with and as per directions or consent of the client.
Asset Allocation
Assets will be allocated amongst following asset classes in consultation with and as per directions or consent
of the client.
The amount of Portfolio invested in Equity will be between 0% - 100% of the Portfolio.
The amount of Portfolio invested in Debt will be between 0% - 100% of the Portfolio.
Page | 13
The amount of Portfolio invested in Gold ETFs will be between 0% - 100% of the Portfolio.
The amount of Portfolio invested in other asset classes which are available through either exchange traded
products or through mutual funds will be between 0% - 100% of the Portfolio.
Investment can be made in other asset classes as per choice, consent or directions of the client.
Securities
Investments will be made in Stocks, Mutual Funds, Exchange Traded Funds (ETF), Non-Convertible
Debentures, and Bonds. The Portfolio will also use derivative instruments – Futures and Options – for hedging
and rebalancing of the portfolio and other investment options as per choice, consent or direction of the client.
Derivative Instruments shall, however, not be used in case of NRI investors.
Investment in equities will be valued on the closing price of that equity at NSE. In case of investments in any
stocks listed on BSE only, the same will be valued based on the closing price of that equity at BSE. Investment
in Mutual Funds and ETFs will be valued on the day end’s NAV. NAV Investment in NCDs, bonds and other
debt Instruments will be valued at closing price, if listed, or as per valuation provided by the issuer.
Investment in “Futures and Options”, used for hedging, shall be valued at actual cash margins paid against
F&O contracts, summed with Mark to Market profit / loss computed on the basis of closing price of such
contracts. Derivative Instruments shall, however, not be used in case of NRI investors.
Advisory Services
Equity Advisory Portfolio
Introduction
This portfolio is designed for those investors who seek aggressive capital appreciation from their equity asset
allocation. The portfolio will invest in stocks across sectors, market capitalization categories and investment
themes.
Investment Objective
The investment objective is to provide returns and capital appreciation through broad based participation in
equity markets with investments in companies which have sustainable business model and high growth.
Asset Allocation
Assets will be allocated amongst following asset classes in consultation with and as per directions or consent
of the client.
The amount of Portfolio invested in Equity will be between 0% - 100% of the Portfolio.
Investment can be made in other asset classes like debt, Gold ETF as per choice, consent or directions of the
client.
Securities Investments will be made in Stocks and other investment options like Mutual Funds, Exchange Traded Funds
(ETF) as per choice, consent or direction of the client.
Page | 14
Investment in equities will be valued on the closing price of that equity at NSE. In case of investments in any
stocks listed on BSE only, the same will be valued based on the closing price of that equity at BSE. Investment
in Mutual Funds and ETFs will be valued on the day end’s NAV Investment.
The term “Strategy” or “Strategies” referred in this document is not prima facie the strategy(s) devised to
organize investment portfolios, rather these are various investment categories/ frameworks on the basis of
which investment portfolio of a subscriber can be tailored. Reference to the term “Strategy” or “Strategies”
however helps in defining and communicating fee structure to a subscriber in a simple and transparent
manner.
The final fee structure and fee charging frequency may vary with every client and would be pre decided
between the portfolio manager and the client. This may be changed during the term of the PMS arrangement
upon mutual consent by the investor and the portfolio manager.
The fee portion below is common for all strategies whether Discretionary and Non Discretionary Product
PLACEMENT FEE:
A Placement fee will be charged as a percentage of corpus over and above the fixed management fee and
performance fee. The placement fee shall also be charged each time corpus is infused/ brought in by the client
during the lifetime of the portfolio investment. The placement fee shall be computed as a percentage of the
initial corpus brought in by the client and if subsequent to account opening, additional corpus brought in by
such client then it shall be computed as a percentage of the additional corpus brought in. The placement fee
so computed shall be completely recovered from client’s portfolio within the first year of receiving corpus. The
Placement fee shall be deducted from client’s portfolio at end of each calendar quarter till completion of one
year of receiving corpus. For clients starting their PMS in between any quarter, the placement fee will be
proportionately charged for that quarter and thereafter on quarterly basis till recovery of full placement fee. If
client closes his portfolio account prior to recovery of entire placement fee, the Portfolio Manager shall
deduct the balance Placement Fee from the proceeds payable to the client upon portfolio closure. For details
kindly refer the annexure to this Risk Disclosure Document.
FIXED MANAGEMENT FEE: The Fixed fee Shall be applicable by the Portfolio Manager will not exceed 3.00%
p.a. charged up to 0.75% at the end of every quarter / month [as may be agreed with clients] on the daily
average Net Asset Value of the Portfolio (inclusive of all securities and cash/bank balance).
PERFORMANCE FEE: The Performance fee shall not exceed 25% of incremental gains beyond annualized
hurdle rate not exceeding 12% on the basis of High Water Mark Principle over the life of the investment. For
existing clients, the performance fee is being computed on a High Watermark Principle over the life of the
Investment at the end of every financial year on financial year basis. From 1st August, 2012, for new clients the
performance fees is being charged on completion of 12 months (anniversary basis) and not financial year
basis.
SECTION II: FEES AND EXPENSES PERTAINING TO THE PORTFOLIO STRATEGIES
Page | 15
PREMATURE REDEMPTION CHARGES/ EXIT CHARGES: If the redemption is done prematurely at the option of
the client, the Portfolio Manager shall levy the Premature Redemption Charges/ exit charges as may be agreed
upon between the Portfolio Manager and the clients when signing the Portfolio management Services
Agreement.
Further, the below general costs and expenses shall be borne by the clients availing the services of the
portfolio manager.
1. Custodian/ Depository Participant Fee:
The charges relating to opening and operation of demat accounts, custody and transfer charges for
shares, bonds and units, dematerialization and rematerialization, pledge and removal of pledge, etc.
will be as per the actual charged by the Depository Participant/Custodian.
2. Registrar and transfer agent fee:
Charges payable to the Registrar and Share Transfer Agents in connection with effecting transfer of
any or all securities and bonds, units, etc. including stamp charges, cost of affidavits, notary charges,
postage/courier charges and other related charges will be recovered on actual
3. Brokerage and transaction cost:
The Brokerage and other charges like Goods and Services tax, Stamp duty, Security Transaction Tax,
SEBI Fees, Bank charges, Turnover tax, and other charges (if any), as per the rates existing from time
to time, will be charged on actual.
4. Securities Lending Charges:
If utilized, the charges pertaining to lending of securities, costs associated with transfer of securities
connected with lending transfer operations, Depository Participant Charges, Share Transfer Agent
Charges, etc. would be recovered on actual.
5. Certification Charges or Professional Charges:
Any charges payable for outsourced professional services like accounting, taxation, auditing, and any
legal services, notarizations, etc., incurred on behalf of the Client by the Portfolio Manager, will be
charged from the client on actual.
6. Fees, entry/exit loads and charges in respect of investment in mutual funds:
Mutual funds may be recovering expenses or management fees, entry/exit loads and other incidental
expenses along with services tax, if any, on such recoveries and such fees, entry/exit loads and
charges including services tax on such recoveries, as per the relevant regulation shall be paid to the
asset management company of these Mutual Funds on the clients’ account. Such fees and charges are
in addition to the Portfolio Management fees described above.
7. Incidental Expenses:
Charges in connection with day to day operations like courier charges incurred in providing physical
reports relating to client’s portfolio / welcome letter / account statements/ other communication to
clients, stamp duty, Goods and Services tax, postal, telegraphic expenses, opening and operation of
bank and demat accounts or any other out of pocket expenses incurred by the Portfolio Manager, on
behalf of the client, would be recovered from the client. All incidental and ancillary expenses not
Page | 16
covered above but incurred by the Portfolio Manager on behalf of the client would be recovered from
the client.
SECTION III: COMMON FEATURES OF THE PORTFOLIO STRATEGIES {common features applicable to all strategies}
Minimum investment amount is Rs. 25 Lakhs.
Liability of a client shall not exceed client’s investment with the portfolio manager.
The Portfolio Manager shall charge audit fees, custodial/ AMC charges and other charges/costs, attributable
to the Portfolio Management Services on actual.
Any charges payable for outsourced professional services like accounting, taxation, auditing, and any legal
services, notarizations, etc., incurred on behalf of the Client by the Portfolio Manager, will be charged from
the client on actual.
The Client may withdraw whole or part of the funds or securities from the portfolio account by giving advance
notice and the Portfolio Manager will endeavor to liquidate the securities held in the strategy and return the
funds or securities of the strategy, as the case may be, to the client within reasonable time. In case the
Portfolio Manager is for any reason unable to sell the securities, the Client shall be obliged to accept the
securities in the portfolio.
The Portfolio Manager will provide periodical reports as required under the regulations at the communication
address provided by the client at time of account opening. In case Portfolio Manager is unable to provide the
periodic reports in physical copy, the same shall be provided to clients via email at the email id registered by
clients at time of account opening.
The portfolio account will be audited by the Independent Chartered Accountant every year and copy of the
Certificate issued by the Chartered Accountant will be given to the Client.
GLOSSARY OF TERMS USED IN THE RISK DISCLOSURE DOCUMENT AND ANNEXURE A
Discretionary portfolio: A portfolio where the funds of each client are managed individually and independently by the fund manager in accordance with the needs of the client.
Non discretionary Portfolio: A portfolio where the funds are managed by the fund manager in accordance with the directions of the client. Hurdle rate: The rate over which profit sharing / performance related fees are usually charged by portfolio managers. This is not a fixed number and would be specified in the agreement signed with the client. High Water Mark Principle: As defined by SEBI, High Water Mark shall be the highest value that the
portfolio/account has reached. Value of the portfolio for computation of high watermark shall be taken to be
the value on the date when performance fees are charged. The portfolio manager shall charge performance
based fee only on increase in portfolio value in excess of the previously achieved high water mark
KARVY STOCK BROKING LTD.
Page 1
ANNEXURE B - Details of all settled and pending disputes against Karvy Stock Broking Limited/ its directors/associates as on July 2019
There have been no Enquiry/investigation/disciplinary action/adjudication/prosecution/ any other action initiated/taken or penalty imposed pending against Karvy Stock Broking Limited (KSBL), its associate/s or any of its directors/shareholders/partners by SEBI/exchange(s)/clearing corporation(s)/clearing house or any other regulatory authority except as mentioned below:
A. DETAILS REGARDING ACTIONS INITIATED/TAKEN/ PENDING AGAINST KARVY STOCK BROKING LIMITED
Sl.no. Details of the case SEBI/Exchange observation(s)
SEBI Action Corrective steps taken by Company towards observations
made by SEBI
Pending actions,
if any
(a) (b) (c) (d) (e)
1. SEBI vide order dated
26.05.2006,
directed, Karvy Stock
Broking Ltd. (KSBL),
not to act as a
depository
participant, passing
of final orders, except
for acting on the
instructions of
existing beneficial
owners ('BOs’). SEBI
also directed KSBL, as
a stock broker, not to
undertake any
proprietary trades in
- Subsequent to the enquiry
and hearing with the whole
time member, SEBI in its final
order dated June 22, 2007,
directed that KSBL as a DP is
prohibited from opening
new demat accounts till
December 31, 2007. SEBI
also passed an order that the
certificate of KSBL as a
broker be suspended for a
period of 3 months.
KSBL as a broker had filed an
appeal no 75 of 2007 on June
25, 2007. SAT had stayed the
(i) Subsequent to PAN being made
mandatory by regulators, the
Company has developed a
software application wherein the
PAN details provided by the
applicants are validated online
with the Income Tax website. Only
such applications where PAN
details are valid in all respects are
processed for opening BO
accounts. The Company has taken
permission from the depository for
such online validation.
(ii) The concurrent audit has been
strengthened by way of 100% audit
of account opening application
Nil
KARVY STOCK BROKING LTD.
Page 2
Sl.no. Details of the case SEBI/Exchange observation(s)
SEBI Action Corrective steps taken by Company towards observations
made by SEBI
Pending actions,
if any
securities, either off-
market or on market,
passing of final
orders.
order on July 4, 2007.
KSBL as a DP had filed an
appeal no 111 of 2007 on
July 17, 2007. SAT had stayed
the order on August 8, 2007.
SAT in its final order dated
June 30, 2008 set aside the
impugned order dated June
22, 2007, remanding the
matter back to SEBI with a
direction to pass separate
orders against KSBL – as a
Broker as well as a DP with
regard to the violations
emanating from the enquiry
officer’s report.
The Whole Time Member
had granted a personal
hearing as per the order of
Hon’ble SAT, wherein
submissions to SEBI have
been made by the company.
forms by external agency with
regard to compliance and
fulfillment of the documents
required as per KYC norms.
Extensive training sessions to all
the DP front office employees has
been conducted educating them
on the scrutiny required to be
done while accepting account
opening application form
(iii) Front office personnel of some
of the branches have also been
nominated for NSDL / CDSL training
for the purpose of compliance of
NCFM / NCDO certification
requirement. Fortnightly review of
the Demat accounts opened with
the same address is undertaken by
a senior resource
(iv) No applications are accepted
and accounts are opened without
an “in-person” verification and re-
verification of original documents,
KARVY STOCK BROKING LTD.
Page 3
Sl.no. Details of the case SEBI/Exchange observation(s)
SEBI Action Corrective steps taken by Company towards observations
made by SEBI
Pending actions,
if any
SEBI issued final order in
respect of KSBL – Depository
Participant on 28th January,
2014 and has in paragraph
20 such order clearly
concluded that KSBL –
Depository participant has
already undergone
prohibition from taking up
any new assignment for a
period of 18 months and 26
days and hence there need
not be any further penalty on
KSBL – Depository
Participant.
SEBI issued final order in
respect of KCPL – RTI on 3rd
February, 2014 and in such
order stated that since KCPL
has already undergone
prohibition from acting as
RTI for approximately 10
months no further penalty is
warranted.
required as a part of KYC, by an
employee of the Company.
Reporting of off-market
transactions submitted for
execution to the DP and
Compliance Head on a fortnightly
basis.
(v) The above corrective actions
taken by the Company have been
intimated to SEBI in our various
correspondences during the
process. An inspection has also
been conducted by SEBI during
October 2009 to review if the
procedures and processes adopted
are in order. There has been no
adverse observation by the
inspection team.
KARVY STOCK BROKING LTD.
Page 4
Sl.no. Details of the case SEBI/Exchange observation(s)
SEBI Action Corrective steps taken by Company towards observations
made by SEBI
Pending actions,
if any
SEBI had passed order dated
14 March 2014 prohibiting
KSBL- Broker from taking up
any new assignment or
contract or launch a new
scheme (i.e., not to take new
clients/customers) for a
period of 6 months in respect
of its business as a stock
broker.
KSBL had preferred an appeal
before Hon’ble Securities
Appellate Tribunal (SAT)
against the order. Hon’ble
SAT, vide order dated 16
April 2014, in the matter of
Appeal No 66/2014 granted
a stay on SEBI’s order dated
14 March 2014. Further, SAT
vide order dated 21 January
2015 has set aside the SEBI’s
order dated 14 March 2014
and directed SEBI to pass
appropriate order after
KARVY STOCK BROKING LTD.
Page 5
Sl.no. Details of the case SEBI/Exchange observation(s)
SEBI Action Corrective steps taken by Company towards observations
made by SEBI
Pending actions,
if any
hearing by the Whole Time
Member., Subsequently
hearing was held before the
WTM SEBI on 7th April, 2015.
SEBI issued final order dated
15th June, 2015 disposing off
the proceedings against KSBL
by directing it to not
undertake only new primary
market assignment including
acting as syndicate member
or providing syndication
services (procuring IPO
applications and bidding in
IPOs), directly or indirectly ,
in IPOs for a period of one
year. SEBI has also clarified
that this direction shall not
hinder the activities for
which KSBL was already
engaged for undertaking
primary market activities
before the date of the order.
W.e.f June 16, 2016 KSBL has
commenced to undertake
KARVY STOCK BROKING LTD.
Page 6
Sl.no. Details of the case SEBI/Exchange observation(s)
SEBI Action Corrective steps taken by Company towards observations
made by SEBI
Pending actions,
if any
new primary market
assignments including acting
as a syndicate member or
providing syndication
services (procuring IPO
applications and bidding in
IPO’s).
2 In February 2007, SEBI had initiated proceedings under section 24 of the SEBI act, against the three directors of the company, viz. Mr. C. Parthasarathy, Mr. M. Yugandhar, Mr. M. S. Ramakrishna, and Karvy Stock Broking Limited which are pending before the additional chief metropolitan magistrate, Mumbai.
-- -- -- Pending
KARVY STOCK BROKING LTD.
Page 7
Sl.no. Details of the case SEBI/Exchange observation(s)
SEBI Action Corrective steps taken by Company towards observations
made by SEBI
Pending actions,
if any
Arising from the above said investigation, SEBI has filed two separate complaints under section 190 of criminal procedure code r/w 68A & 621 of Companies Act-1956 against KSBL and three of its Directors, namely Mr C.Parthasarathy, Mr M.Yugandhar and Mr Ramakrishna before the Special Judge at Mumbai vide Case Nos: 66/2016 and 74/2016 before the SPecial Judge and the said complaints are pending before the said court.
KARVY STOCK BROKING LTD.
Page 8
Sl.no. Details of the case SEBI/Exchange observation(s)
SEBI Action Corrective steps taken by Company towards observations
made by SEBI
Pending actions,
if any
3 Two cases - BS & FC (RC 3(E)/ 2006 and 4(E)/ 2006) under Sections 120 B r/w 420, 467, 468 & 471 of IPC, under Section 68(A) of the Companies Act 1956 and under Section 13(2) r/w 13 (1) (d) of the PC Act, 1988 were registered by CBI vide charge sheet dated September 29,2007 and October 30, 2007 in the matter of Yes Bank and IDFC Ltd. after arraying Karvy Stock Broking Limited, Karvy Computershare Pvt. Ltd and Karvy Consultants Ltd and other officers of these entities including Mr. C. Parthasarathy, as co-accused. The matter
-- -- -- Pending
KARVY STOCK BROKING LTD.
Page 9
Sl.no. Details of the case SEBI/Exchange observation(s)
SEBI Action Corrective steps taken by Company towards observations
made by SEBI
Pending actions,
if any
is pending before the Hon’ble Special judge.
4 The Enforcement
Directorate, after
relying on the
investigations of CBI
and that of SEBI and
on the premise that
Section 467 of IPC
framed against the
co-accused
represents a
predicate offence
which is categorized
as a scheduled
offence under
Section 2(u) of the
Prevention of Money
Laundering Act-2002
(PMLA), has filed a
prosecution
-- -- -- Pending
KARVY STOCK BROKING LTD.
Page 10
Sl.no. Details of the case SEBI/Exchange observation(s)
SEBI Action Corrective steps taken by Company towards observations
made by SEBI
Pending actions,
if any
complaint in April
2013 bearing
no.04/2013, in terms
of the provisions of
PMLA. The matter is
pending before The
Appellate Authority
PMLA New Delhi
5. Inspection
of Portfolio
Management services
business of Karvy
Stock Broking Limited
(KSBL) conducted in
2013-14.
Based on the findings of
inspection, the company
has received a show
cause notice as to why
adjudication
proceedings should not
be initiated against the
Company.
SEBI had vide show cause
notice dated November 24,
2014 initiated adjudication
proceedings against Karvy
Stock Broking Ltd (KSBL)
(Portfolio Manager). This
adjudication was initiated
subsequent to the inspection
of KSBL as a portfolio
manager in February 2014.
KSBL has responded to the
notice vide its letter dated
January 14th, 2015. KSBL has
also filed for settlement
(consent) in the matter vide
1. The PMS Operations team
actively ensures in
coordination with the
operations team at Hyderabad
that KYC details of clients who
opt for PMS are uploaded to
KRA
2. The PMS Operations team
routinely scrutinizes account
opening forms and any
difference in ink if observed
between signatures of client
and text written by client is
immediately escalated and the
NIL
KARVY STOCK BROKING LTD.
Page 11
Sl.no. Details of the case SEBI/Exchange observation(s)
SEBI Action Corrective steps taken by Company towards observations
made by SEBI
Pending actions,
if any
its letter dated January 23,
2015. Hearing in the
adjudication matter was held
before the AO on June 29,
2015 wherein authorized
representatives of KSBL
appeared before the AO and
made submissions. Hearing
in the consent proceedings
was held on 5th January,
2017. KSBL has remitted an
amount of Rs 6.8 lakh
towards settlement of the
matter and the proceedings
have been closed.
form rejected for clarification
and confirmation by client
3. All teams are being repeatedly
sensitized to fact that the word
“scheme” is not to be used
with respect to PMS
documents
4. The PMS Product team is in the
process of introducing a risk
profiling tool.
KARVY STOCK BROKING LTD.
Page 12
Sl.no. Details of the case SEBI/Exchange observation(s)
SEBI Action Corrective steps taken by Company towards observations
made by SEBI
Pending actions,
if any
6.
Inspection of Karvy
Stock Broking Limited
(KSBL) as a
Depository
Participant of NSDL
and CDSL conducted
for the period from
April 2010 to March
2013.
(i)SEBI advised to take due
care while billing the clients
and avoid discrepancies in
billing.
(ii) In this regard SEBI advised
to ensure the strict
Compliance of the provisions
of the SEBI Act, 1956,
Securities Contracts
(Regulation) Rules, 1957 and
the rules, Regulations, Bye-
laws, directives/circulars
issued by the depositories
from time to time.
(i)With reference to the
observations raised by the
inspection officials pertaining to
discrepancies in billing we submit
that necessary corrective action
has been taken to prevent
recurrence of such observations.
(ii)We ensure to follow strict
compliance of the provisions of
SEBI Act, 1956, Securities
Contracts (Regulation) Rules, 1957
and the rules, Regulations, Bye-
laws, directives/circulars issued by
the depositories from time to
time.
Nil
KARVY STOCK BROKING LTD.
Page 13
Sl.no. Details of the case SEBI/Exchange observation(s)
SEBI Action Corrective steps taken by Company towards observations
made by SEBI
Pending actions,
if any
7. Inspection of Karvy
Stock Broking Limited
(KSBL) as a Broker
conducted in March
2013 by SEBI.
Instances of complaints
involving trade disputes
and instances involving
non-settlement of
funds/securities on
quarterly basis
observed.
Inadequacies in
maintenance of records
pertaining to delivery /
dispatch of contract
notes
Final observations for the
inspection have been
received. Administrative
warning has been issued by
SEBI.
Provided information on measures
such as centralized call
confirmation for loss making
customers, confirmation call for
dormant customers upon their
trade, awareness and counseling to
dealers etc
The detailed dispatch records
through Indian Post with proper
bar code for sample dates have
been provided.
Nil
8 Inspection of Karvy
Stock Broking Ltd
(KSBL) as a Broker
conducted in March
2015 by SEBI
KSBL not adhered to the
guidelines prescribed in
SEBI Master Circular
dated December 31,
2010 with respect to the
categorization of clients
based on risk.
SEBI has advised to take
necessary corrective action
to ensure non-recurrence of
the observations
Provided information on measures
such as centralized call
confirmation for loss making
customers, confirmation call for
dormant customers upon their
trade, awareness and counseling to
dealers etc
Few NRI clients were not classified
as high risk and income ranges
NIL
KARVY STOCK BROKING LTD.
Page 14
Sl.no. Details of the case SEBI/Exchange observation(s)
SEBI Action Corrective steps taken by Company towards observations
made by SEBI
Pending actions,
if any
Instances of investor
complaints of
unauthorized trading by
stock broker were
observed and some of
such complaints had
been redressed with
decisions of stock broker
to repay/ restore the
disputed claims on favor
of clients, by IGRP
were inadvertently captured lesser
than actual income range for few
clients
The errors have been since
rectified and necessary steps taken
to prevent non-recurrence of the
observations.
9 Writ petition filed by
KSBL w.r.t release of
arbitration award
amounts to investors
in the absence of
stay orders. KSBL had
challenged the vires
of Clause 9.3 (c) of
SEBI Circular dated
August 11, 2010
SEBI and NSE have made
submissions as
respondents in this
matter.
The writ petition is
pending disposal before
the Bombay High Court
NA NA NIL
KARVY STOCK BROKING LTD.
Page 15
Sl.no. Details of the case SEBI/Exchange observation(s)
SEBI Action Corrective steps taken by Company towards observations
made by SEBI
Pending actions,
if any
10 Inspection of KSBL
carried out by NSE in
October 2016
Corporate Guarantees
were extended by KSBL
to subsidiaries which
were not engaged in the
business of securities
Loans given to
subsidiaries not reduced
from networth
Penalty of Rs 25 lakh levied More than 90% of the corporate
guarantees extended to
subsidiaries has been closed.
Loans given to subsidiaries have
been recovered and going forward
would be reduced from the net
worth
NIL
B. Details of action initiated / taken/pending, i f any, by SEBI against Karvy Data Management Services Limited., Group Company.
Sl.no.
Details of the case SEBI Observations SEBI Action Corrective steps taken by Company towards observations made by SEBI
Pending actions, if any
(a) (b) (c) (d) (e)
KARVY STOCK BROKING LTD.
Page 16
1 SEBI had conducted
inspection of KDMSL
KRA activity in
February 2016
Deficiencies in complaint
handling mechanism
Deficiencies in scanned
documents
System audit done
calendar year wise
instead of financial year
Warning letter dated January
23, 2017 issued by SEBI for
the deficiencies observed
Complaints handling mechanism.
Help desk team has been set up to
attend complaints from investors
and intermediaries. Separate email
ID has been created to handle
grievances.
Deficiencies in scanned
documents.
KYC documents are scanned and
uploaded by intermediaries
against KYC data uploaded to
KARVY KRA for registration.
Incomplete documents are not
rejected while processing and
discrepancies in documents are
brought to the notice of the
concerned intermediary for
rectification.
System audit was done calendar
year wise instead of financial year
wise.
Periodicity of system audit has
been changed from calendar year
to financial year.
NIL
KARVY STOCK BROKING LTD.
Page 17
C. Details of action initiated / taken/pending, i f any, by SEBI against Karvy Comtrade Limited., Group Company.
Sl.no.
Details of the case MCX/NCDEX/SEBI Audit observation(s)
MCX/NCDEX/SEBI Action Corrective steps taken by Company towards observations made by MCX/SEBI
Pending actions, if any
(a) (b) (c) (d) (e)
KARVY STOCK BROKING LTD.
Page 18
Sl.no.
Details of the case MCX/NCDEX/SEBI Audit observation(s)
MCX/NCDEX/SEBI Action Corrective steps taken by Company towards observations made by MCX/SEBI
Pending actions, if any
(a) (b) (c) (d) (e)
1 On the basis of the observations reported in the PwC Audit report, the FMC had directed that a special forensic audit be conducted for the trades done by Indian Bullion Markets Association (IBMA) through the captioned Member. Accordingly, the special forensic audit was conducted by the Exchange through M/s. Borkar & Muzumdar, Chartered Accountants. Show cause notice dated August 28, 2015 enclosing therewith the audit report was issued by MCX.
Wash Trades/Cross Deals
in illiquid contracts
On the basis of the reporting
in the forensic audit report
and the personal hearing
given to the Member before
the Disciplinary Action
Committee Meeting held on
September 28, 2015, the
Committee decided that a
total penalty of Rs. 21,73,539
+ Advice (plus applicable
service tax) be levied upon
the Member. Accordingly,
the same was levied by the
Exchange and recovered
1. Blocking of contracts which
are illiquid in nature.
2. Creating awareness
amongst clients , branch
officials and authorised
persons/sub-brokers about
illiquid contracts and cross
deals.
3. Based on communication
received from the
Exchanges w.r.t dealings of
particular client, adequate
explanation is sought from
the clients and the trading
of the client in that
contract is blocked if felt
necessary.
NIL
KARVY STOCK BROKING LTD.
Page 19
Sl.no.
Details of the case MCX/NCDEX/SEBI Audit observation(s)
MCX/NCDEX/SEBI Action Corrective steps taken by Company towards observations made by MCX/SEBI
Pending actions, if any
(a) (b) (c) (d) (e)
2 SEBI had inspected KCTL in the month of February 2017
Bank balances in client
bank account not
commensurate with the
credit balances as per
back office
MCX vide their letter dated
21st September, 2018 levied
a penalty of Rs 15.85 lakh on
KCTL
Necessary corrective action has
been taken to ensure that the
balances are in sync.
NIL
KARVY STOCK BROKING LTD.
Page 20
Sl.no.
Details of the case MCX/NCDEX/SEBI Audit observation(s)
MCX/NCDEX/SEBI Action Corrective steps taken by Company towards observations made by MCX/SEBI
Pending actions, if any
(a) (b) (c) (d) (e)
3 For transactions by certain clients in the contracts of Guar seed and Guar Gum during the period October 2011 to March 2012 NCDEX has issued show cause notice to KCTL in August 2018
The transactions carried
out by the clients and
their related entities
through other brokers
were violative of open
interest limits and
market wide position
limits
NCDEX has proposed to levy
a monetary penalty.
The observations in the show
cause notice have been challenged
by KCTL vide their reply dated 5th
September, 2018 and have asked
for a personal hearing.
PENDING
KARVY STOCK BROKING LTD.
Page 21
Sl.no.
Details of the case MCX/NCDEX/SEBI Audit observation(s)
MCX/NCDEX/SEBI Action Corrective steps taken by Company towards observations made by MCX/SEBI
Pending actions, if any
(a) (b) (c) (d) (e)
4 On 27-09-2018, KCTL along with other 300 NSEL members had received a Show Cause notice (SCN) for the paired contracts traded on NSEL platform.
SEBI had alleged that the
members had facilitated
its clients in entering into
paired contracts which is
a violation of the certain
guidelines which
impacted the fit and
proper criteria of KCTL as
a Broker. KCTL has been
granted time till 9th
November, 2018 for
filing its reply
SEBI have called for
explanation of KCTL
Vide letter dated November 6,
2018 KCTL has sent a detailed
reply refuting the allegations in the
show cause notice. Matter is
pending
Pending
KARVY STOCK BROKING LTD.
Page 22
D. Details of action initiated / taken/pending, i f any, by SEBI against Karvy Financial Services Limited., Group Company.
Sl.no. Details of the case
SEBI observation(s) SEBI Action Corrective steps taken by Company towards observations made by SEBI