Sebi slaps notices on scam-accused

The Securities and Exchange Board of India (Sebi) has issued show-cause notices to all those allegedly involved in the IPO-demat scam.

The notices have been issued to depositories, depository participants (DPs) and other intermediaries, asking them why further inquiry cannot be initiated against them in the scam.

The market regulator has alleged that all those named in the scam have violated the Sebi regulations. The intermediaries have been given 10 days' time to reply to the notices. Some of them have already replied, denying any such violations.

In the second half of November, Sebi had issued disgorgement order, asking depositories, DPs and market intermediaries to deposit with it ill-gotten money totalling to Rs 116 crore within six months.

The NSDL has already appealed to the Securities Appellate Tribunal (SAT), saying that the market regulator has no power to order depositories for disgorgement. The others are expected to appeal before the 45 days' time limit expires. The CDSL spokesperson confirmed that it will be filing an appeal soon.

The show-cause notices are a follow-up of the Sebi's April 2006 interim order. It is understood that the Sebi wants to complete the inquiry as fast as possible so that it can come out with the final order in case the SAT stays the disgorgement order.

In the end of November, the Parliamentary Standing Committee On Finance had submitted its report on the IPO scam, in which it had pulled up the market regulator for not being vigilant.

The committee had said the timely action by the Sebi could have prevented recurrence of the same errors by depositories that had led to the IPO scam.

The ultimate onus of regulating the capital markets rests with the Sebi, the committee had said, adding that had the market regulator been vigilant, it would not have overlooked the errors of the depositories, year after year.

It is reliably learnt that the report will be discussed by the market regulator in the next few days in one of its market advisory committee meetings to decide the further course of actions.