The capital market regulator has finally cleared the National Securities Depository Ltd of charges of poor oversight in an IPO scam that hit the nation between 2003 and 2005, when the depository was headed by the current SEBI chief C.B. Bhave, who has faced questions about conflict of interest as he moved from a participatory to a regulatory role.
The board of the Securities and Exchange Board of India (SEBI) on Monday passed an order absolving the NSDL of charges that it failed to prevent the scam that involved fake IPO applications to corner shares meant for retail investors.
The issue gained importance as there were allegations that SEBI was trying to hush up the matter to save embarrassment to it current chairman.
The board held that it found no evidence of any lapse on the part of the NSDL
“As observed by the Hon’ble SAT (securities appellate tribunal) in its order, the one single reason that explains the events is the failure of KYC (know your customer) verification... is a responsibility cast on DPs (depository participants),” the SEBI Board order said.
Blaming the overall system of inspections, the SEBI Board order said, “there is scope for continuous improvement of systems, procedures and practices in conducting inspections.”
In 2008, two-member bench was constituted by SEBI to probe the case. The bench passed an order against NSDL asking it to hold an independent probe to establish individual accountability.
SEBI made the document public after a full year following a public interest litigation plea on the subject.