Sebi imposes ₹1 crore fine on CDSL for multiple compliance lapses

Regulator flags shortcomings in pledge-rejection communication, cybersecurity controls, vulnerability patching and disaster recovery drills

Markets regulator Sebi on Friday imposed a penalty of Rs 1 crore on Central Depository Services (India) Ltd (CDSL) for multiple compliance lapses, including failure to communicate reasons for rejection of pledge requests to the depository participants (DPs) of both the pledgor and pledgee and shortcomings in disaster recovery drills.

CDSL has been directed to pay the penalty within 45 days, failing which recovery proceedings may be initiated.

In its 102-page order, Sebi said CDSL had violated several regulatory requirements during FY2023-24, following an inspection of its operations.

The violations included failure to communicate reasons for rejection of pledge requests to the depository participants of both the pledgor and pledgee, non-compliance with prescribed procedures for handling Client Unpaid Securities Accounts (CUSA), inadequate measures to prevent unauthorised data transmission and shortcomings in disaster recovery operations.

 

The regulator also found that CDSL had failed to patch identified vulnerabilities within the timeline prescribed by Sebi. Further, its Vulnerability Assessment and Penetration Testing (VAPT) exercise was not comprehensive as it did not cover all domains and external applications.

"Noticee has been found to have committed multiple compliance lapses in the discharge of its depository functions. These include failure to communicate the reasons for rejection of pledge requests to the DPs of the pledgor and pledgee, non-adherence to the joint proposal framed ...in relation to CUSA operations, inadequate measures to prevent unauthorised transmission of data, incomplete migration of operations to the DR site during the DR drill, failure to patch vulnerabilities within the timeline stipulated by Sebi, and conducting a VAPT exercise that was not comprehensive," Sebi said.

In July, the regulator imposed a penalty of Rs 1 crore on CDSL for cybersecurity lapses linked to the malware attack that disrupted its systems in November 2022. 

4 firms get Sebi nod for IPO 

Four companies — home appliances maker Atomberg Technologies, organised food and grocery retailer Ratnadeep Retail,

construction and infrastructure firm GNI Infrastructure and liquid carbon dioxide (CO2) producer Punjab Carbonic —

have secured the Securities and Exchange Board of India’s (Sebi’s) approval to raise funds through initial public offerings (IPOs).

 These firms filed their preliminary IPO papers between March and August. After reviewing their draft papers, the regulator gave its final observation during October 27-30, an update from the markets regulator showed on Friday. Sebi’s observations mark an

important step in the IPO process, allowing companies to proceed with the preparations for their public issues, subject to applicable regulatory requirements.

 According to the draft red herring prospectus (DRHP), Atomberg’s IPO comprises a fresh issue of shares worth up to ₹450 crore and an offer for sale (OFS) of 76.5 million equity shares. As a part of the OFS, A91 Partners, Temasekbacked V-Sciences

Investments, Jungle Ventures, Inflexor, Steadview Capital Mauritius and Survam Partners LLP will offload their shares.

 Ratnadeep Retail’s IPO comprises a fresh issue of equity shares aggregating up to ₹400 crore and an OFS of nearly 14.9 million equity shares by promoters. GNI Infrastructure’s proposed IPO will be a combination of a fresh issue of 21 million

shares and an OFS of 93.88 lakh shares by promoters and existing shareholders,

according to the draft papers.

 Punjab Carbonic’s proposed IPO is a combination of a fresh issue of 6 million equity shares and an OFS of 3.5 million equity shares.

 Meanwhile, the draft IPO papers of WOG Technologies were withdrawn/returned on October 30, as per an update  with Sebi.