The Securities and Exchange Board of India (Sebi) recently made a significant decision to cancel the registration of Karvy Investor Services Ltd (KISL) as a merchant banker. This action was a result of an inspection conducted by Sebi during March 15-17, 2023, where it was discovered that Karvy Investor Services did not meet the necessary criteria for functioning as a merchant banker. During the onsite inspection, it was determined that the company lacked both operational functionality and adequate infrastructure at its registered and correspondence addresses.
Further investigation by Sebi revealed that Karvy Investor Services did not possess the essential infrastructure required for a merchant banker, such as sufficient office space, equipment, and a minimum of two employees with the relevant experience to carry out merchant banking activities. In addition, having a director involved in securities market-related litigation that could negatively impact the business also contributed to Sebi's decision to cancel the registration. Sebi emphasized that Karvy Investor Services was not meeting the eligibility criteria specified in merchant bankers Regulations.
As a consequence of these findings, Sebi took immediate action to cancel the certificate of registration of Karvy Investor Services Ltd. The cancellation was enforced with immediate effect due to the company's failure to comply with the established criteria and pay the required renewal fee from December 13, 2022, to December 12, 2025. This move by Sebi underscores the importance of adherence to regulatory norms and eligibility criteria for companies operating in the capital markets.