National Securities Depository Limited (NSDL) has settled a case with Securities and Exchange Board of India by paying a settlement amount of Rs 15.57 crore, bringing an end to multiple regulatory lapses flagged by the market regulator.
The proceedings stemmed from alleged violations related to delays and errors in freezing and unfreezing of promoter and client accounts, including cases where freezes were imposed late or even after unfreeze instructions were received from stock exchanges.
SEBI also found shortcomings in NSDL’s turnaround timelines, with delays of up to 77 days in implementing regulatory orders, and deficiencies in system-level controls for Client Unpaid Securities Accounts (CUSA/CUSPA) under the November 2022 framework.
Additional allegations included backdated and delayed outsourcing agreements, most notably for core IT services. SEBI order noted, “NSDL gave backdated effect to its outsourcing agreement with various vendors. Further, the agreement with TCS w.r.t the core IT activities of NSDL was continuously delayed. In one instance for the period 01/04/2019 to 31/03/2020, the outsourcing agreement was signed one year after the expiry of the contract period”.
SEBI also alleged, failure to ensure proper conversion of eligible demat accounts into Basic Services Demat Accounts (BSDA). SEBI alleged, NSDL had failed to ensure that DPs were either converting the eligible demat accounts into BSDA or obtaining the BSDA opting out confirmations from the respective BOs in an effective and meaningful manner. Order also highlighted, inadequate oversight of trading members releasing or disposing unpaid securities beyond the permitted period. Order stated, it was observed that TM/CM were disposing off unpaid securities in the market (invocation of pledge) after five trading days also i.e on 6th and 7th trading day also and invoking the securities for pay-in on the same day for the said trades which was not in compliance with SEBI circular dated November 11, 2022.
NSDL filed a settlement application in 2024, without admitting or denying the findings. After multiple rounds of review, SEBI’s Internal Committee recommended a settlement amount of Rs 15.57 crore, noting corrective measures taken and identification of officers-in-default. The proposal was subsequently approved by the High-Powered Advisory Committee and SEBI’s Panel of Whole Time Members.
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