National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL) will together probe Sharepro Services, a registrar and transfer agent (RTA), to find if the said diversion of dividends and shares from investors went as far as demat (dematerialised) shares.
Meanwhile, market regulator Securities and Exchange Board of India (Sebi) is planning an audit of RTAs.
Last week, the regulator had barred Sharepro from the markets for the said diversion of unclaimed dividends and shares of investors. Most of these shares were in physical form.
"The unclaimed or unpaid dividends need to be monitored more closely," a Sebi official said. The regulator is also collecting feedback from other RTAs, depositories, and stock exchanges on ways to avoid a similar scam.
An official at a depository said, "Payment of dividends or physical shares isn't our domain. We are worried about any illegal activities in shares in demat form."
Sector players out noted the said diversion of shares and dividends was mostly of inactive shareholders. "This typically happens with the dormant accounts, where there is no business activity for a long period. The regulator is increasing vigilance and inspections over dormant accounts, which have been and are likely to be misused by various intermediaries and even companies," said Prithvi Haldea, chairman of Prime Database.
On March 22 (Tuesday), the market regulator barred Sharepro and 15 of its officials, including managing director G R Rao, from the securities market.
The regulator's preliminary findings showed that between 2005 and 2015, at least Rs 21 crore was transferred illegally to entities related to Indira Karkera, vice-president of Sharepro.
It found dividends were not paid to the rightful shareholders. Sebi also noticed that shares were transferred only as a rectification entry (not as transfer, transmission, buy, or sell entry) from the folio of one shareholder to another who was related to Karkera. Shares transferred without appropriate documents showed up in Sharepro's software, the regulator found.
The move came after the Mumbai police filed a criminal complaint against Sharepro on the basis of the said irregularities in dividend transfer as claimed by Asian Paints. Britannia Industries, Asian Paints, and Aptech have already ended their agreements with Sharepro. The market regulator has advised all companies dealing with Sharepro to switch to another registrar.
Police arrests Sharepro MD, and V-P
The Mumbai police arrested Sharepro Services' Rao and Karkera for their alleged involvement in the dividend transfer scam.
"The duo will be produced before a Mumbai court on Tuesday," said a police source.