Says Investigating Committee Exceeded Terms Of Reference In 2 Out 3 Orders Relating To NSDL Oversight

November 10, 2009 :  THE Securities and Exchange Board of India (Sebi) board on Monday disposed off two orders relating to the National Securities Depository (NSDL) passed by a Sebi panel, as the board felt that the committee did not act within the framework and terms of reference that were established by the board resolution.

     The Sebi board, in its meeting in August last year, had constituted a committee of two of its members to look into three orders passed against NSDL by the regulator. The panel was set up after CB Bhave, formerly the chairman of NSDL, took over the reins at Sebi, succeeding M Damodaran.

    The three orders relate to different aspects of NSDL’s role in what is known as the IPO allotment scam, in which shares meant for retail investors were cornered by a number of operators who opened a large number of demat accounts under fake names. NSDL has, all along, denied any negligence on its part.

    The committee, comprising two non-whole-time members Mohan Gopal, director of National Judicial Academy and V Leeladhar (former RBI nominee on the Sebi board), took up the three proceedings pending against NSDL as on February 18, 2008, and concluded them vide three separate orders dated December 4, 2008.

     “The committee, however, entered findings that the Board failed as a regulator, while disposing of two matters relating to IPO irregularities and DSQ Software. These findings against the Board are outside the confines of delegation and, therefore, these are without the authority of law,” the Sebi release said.

    “These findings ,which have vitiated these orders cannot be severed from the rest of the orders.

Hence, these orders are null and void and are non est,” the release said.

    What had caused something of a controversy was that the order was not put up on the Sebi website, though the bench had submitted it last year in December. The Sebi board has finally decided to make public the two orders.

    However, the third order in the matter of Rajnarayan Capital Market Services, will be served on the affected parties since it does not have similar findings, the Sebi release said.