Sebi to implement panel report on NSDL

In an unprecedented move of reviving charges dismissed as "null and void" in the past, market regulator Sebi today decided to implement a two-member committee's report charging depository NSDL and others of irregularities in the IPO scam of 2003-2006.

Speaking to reporters after a meeting of Sebi board here, Chairman UK Sinha said that the regulator had decided to implement the two-member committee report on National Securities Depository Ltd's role in the years-old scam.

The regulator would ask NSDL to comply with the findings of the report, he said, without divulging further details.

"Pursuant to the order dated May 9, 2011, of the Supreme Court, the board decided to release the orders of the two member committee, in the matter of IPO irregularities and DSQ software, to NSDL for compliance," Sinha said.

He said that Sebi would ask NSDL to make effective the two-member committee report.

"We will send it to the company," he said, adding that they would have to implement it comply with the report.

The committee, comprising of the then Sebi board members G Mohan Gopal and V Leeladhar, was constituted in 2008 to look into NSDL's role in the IPO scam and it found various lapses on the part of the depository, as also the Sebi itself.

The Sebi declared the findings as "null and void" on the ground that the committee had breached its mandate in making these charges.

Besides, Sebi had also previously dropped its proceedings against NSDL in the DSQ Software share allotment case, where the depository was accused of lapses in dematerialising 1.30 crore shares of DSQ Software, which were later sold into the market without listing.

However, Sebi agreed to revisit these matters after an intervention by the Supreme Court earlier this year.

NSDL had first come under scanner in 2006 in connection with the IPO scam, wherein various entities had fraudulently cornered shares reserved for retail investors and sold them later after the listing.

The depository was accused of not following best practices to detect opening of thousands of fictitious accounts in the name of retail investors for share allotment in IPOs between 2003 and 2006.

This is the first instance of Sebi revisiting an issue previously dismissed by it, as also an unprecedented case of the regulator being open to a report, where its own role has been criticised.

While it was not clear to what extent the fresh probe into the IPO scam would go, the issue might still open a pandora's box, as the charges were made against NSDL for a period when it had CB Bhave as its chief.