IPO scam: Sebi dismisses panel's adverse order

The Securities and Exchange Board of India (Sebi) today dismissed the adverse comments made against it by a two-member committee in the initial public offer (IPO) scam and the irregularities noticed in case of DSQ Software in 2002.

“The findings against the board are outside the confines of delegation and therefore without the authority of law. Hence, these orders are null and void,” said the regulator.

The Sebi board, which met today, however accepted the recommendations of a committee that had G Mohan Gopal, director of National Judicial Academy in Bhopal, and the then RBI Deputy Governor, V Leeladhar, in a third case where no adverse remarks had been made on Sebi’s role.

The committee was set up after C B Bhave took over as Sebi chairman and recused himself from these three cases as these dealt with National Securities Depository Ltd (NSDL), which Bhave headed earlier.

In the IPO scam, the panel had criticised Sebi for being “a passive observer” and disposed of the regulator’s interim order passing strictures against NSDL. In both the cases, the panel had asked for a systems audit as well as an investigation by NSDL.

The IPO scam, unearthed in April 2006, involved depositories, including NSDL, depository participants and market operators, who allegedly helped some entities use 59,000 fictitious demat accounts to get shares meant for small investors.

In case of DSQ Software, the committee disposed of a showcause notice to NSDL imputing that it had failed to perform its duties.

The orders issued by the independent committee on December 4 were not made public that time as the Sebi board had certain reservations regarding them.