We are at the forefront of securities law, handling complex disputes in a rapidly evolving market and shaping regulatory frameworks through our representation in landmark cases.
The dispute revolves around trading activities in the F&O segment. Edelweiss faced challenges when Anugrah Stock Broking Ltd., a brokerage for which it provided clearing services, engaged in Ponzi schemes and defaulted on a large scale. To settle obligations, Edelweiss liquidated collateral, but the Securities Appellate Tribunal (SAT) found Edelweiss at fault for inadequate due diligence, leading to the erroneous liquidation of collateral from Anugrah's investors. Edelweiss argues that it lacked real-time visibility into Anugrah's clients' debit exposure, justifying its actions based on the information provided by Anugrah.
The central issue is whether Edelweiss can be held accountable for restitution to Anugrah's investors, who lack direct contractual ties. This raises complex questions of liability and accountability within the trading ecosystem.
In a significant reversal of principles, the Securities Appellate Tribunal (SAT) overturned SEBI's restitution directives involving AXIS BANK, HDFC, and ICICI. Here, Karvvy, a broker, pledged collateral from its clients with banks to secure loans, a practice later prohibited by a SEBI Circular in June 2019. Subsequently, Karvvy defaulted, prompting banks to liquidate pledged securities. SEBI intervened, directing banks to restitute Karvvy's investors. However, SAT ruled in favor of the banks, granting them the right to invoke pledged shares without SEBI's interference. Both cases are before the Supreme Court, highlighting the regulatory challenges in detecting broker illegalities before the 2019 regulatory changes. The key issue arises whether clearing service providers and banks should bear liability for brokers' misconduct and defaults.
One of the earliest appeals arising from the alleged violations of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, the Firm successfully represented the Appellant acquirers.
