New Delhi: Markets regulator Sebi has settled a case of regulatory non-compliance with National Securities Depository Ltd (NSDL), with the depository paying Rs 15.57 crore to close proceedings linked to lapses found during an inspection in FY24. The settlement came following an NSDL's proposal to resolve the matter "without admission or denial of the findings of fact and conclusions of law".
Accepting the settlement, Sebi said that, upon receipt of the amount, the adjudication proceedings initiated against NSDL through a show cause notice dated October 11, 2024, stood disposed of.
In the show cause notice, the markets regulator had flagged multiple operational and administrative lapses. Among the key observations were significant delays of up to 77 days in freezing accounts despite directions from stock exchanges. In certain cases, NSDL was found to have imposed freezes on promoter accounts even after receiving instructions to unfreeze them.
The regulator also pointed to instances where promoter accounts were frozen only after unfreeze instructions had been issued, or where NSDL unfroze entire Client Unpaid Securities Accounts (CUSA) instead of restricting the action to specific securities (ISINs) as directed by exchanges.
Also, Sebi raised concerns over vendor management and outsourcing arrangements. It said that NSDL gave back-dated effect to its outsourcing agreements with various vendors. Further, the agreement with Tata Consultancy Services (TCS) for core IT activities was repeatedly delayed, including one instance where the contract for the period from April 1, 2019, to March 31, 2020, was executed a year after its expiry.
Additionally, Sebi highlighted systemic shortcomings. These included the absence of adequate system-level checks to ensure securities were credited to the correct beneficial owners, failure to enforce timelines for the disposal of unpaid securities after the fifth trading day, and ineffective implementation of the conversion of eligible demat accounts into Basic Services Demat Accounts (BSDA).
However, Sebi noted that NSDL had undertaken corrective measures and identified officers-in-default in connection with the lapses.
This settlement comes months after NSDL, in October, resolved another case involving alleged violations of depository rules by paying Rs 3.12 crore to the regulator.
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