MUMBAI, APR 30 :  The Securities & Exchange Board of India (Sebi) has, in two separate orders, imposed a penalty of Rs 8 crore on NSDL and CDSL for violating the Depositories Act, 1996 and Sebi (Depositories & Participants) Regulations, 1996 in its latest crackdown in the IPO demat scam that took place between 2003 and 2005.
The Sebi-appointed adjudicating officer, in his order, said a penalty of Rs 5 crore had been slapped on NSDL and Rs 3 crore on CDSL. The penalty would be payable by the two depositories within 45 days.
 
The order said that in the course of investigations, NSDL and CDSL were found to have been responsible for various “commissions and omissions” leading to the opening of a large number of afferent accounts by the key operators.

Neither depository, when contacted, was prepared to comment on the Sebi order.

These afferent accounts were used to corner the portion reserved for retail investors in the IPOs of several companies. “These commissions and omissions on the part of NSDL and CDSL indicate that they have failed to comply with the conditions of registration under Regulation 7 (b) and also Regulation 34 of the Depositories Regulations,” the market watchdog’s order stated. The order also pointed out that both NSDL and CDSL failed to verify and satisfy the eligibility requirement of adequate infrastructure of the participants.

“Lack of adequate mechanisms for the purpose of reviewing, monitoring and evaluating the controls, systems, procedures and safeguards on the part of NSDL and CDSL has resulted in failure to prevent unauthorised outsourcing by the depository participants and also the failure on the part of NSDL and CDSL in taking actions against them”, the order added.

Besides, NSDL had failed to comply with directives issued on January 12, 2006, Sebi said.

The regulator said that the key operators had opened a large number of afferent accounts, which were used for the purpose of cornering the retail portion in the IPOs. Investors suffered great loss on account of this.

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