SEBI fines Indian Clearing Corporation Ltd Rs 5.05 crore; cyber, network audits revealed violations

Violations included not maintaining correct and up to date asset inventory including not correctly classifying mission critical servers.

The market regulator has fined Indian Clearing Corporation Rs 5.05 crore for various violations.

ICCL was incorporated in 2007 as a wholly owned subsidiary of BSE Ltd.

In the order issued on February 25, the Securities and Exchange Board of India (SEBI) said that the violations included submitting the Network Audit Report to SEBI without Governing Board comments and not maintaining correct and up to date asset inventory including not correctly classifying mission critical servers.

In the order, SEBI's Quasi Judicial Authority G Ramar quoted Dr. Bimal Jalan Committee's report on ‘Review of Ownership And Governance Of Market Infrastructure Institutions (MIIs)’ dated November 2010.

The committee report stated, "“These institutions (i.e., stock exchanges, depositories and clearing corporations) are systemically important for the country’s financial development and serve as the infrastructure necessary for the securities market. These institutions are collectively referred to as Market Infrastructure Institutions (MIIs)… They are therefore, ‘vital economic infrastructure’. The recent financial crisis has shown the importance of financial institutions to economic stability.

"Unlike typical financial institutions, the number of stock exchanges / depositories / clearing corporations in an economy is limited due to the nature of its business, although catering to the entire marketplace. Any failure of such an MII could lead to even bigger cataclysmic collapses that may result in an overall economic downfall that could potentially extend beyond the boundaries of the securities market/country. Therefore, such MIIs are considered systemically important institutions… A well functioning clearing corporation is the most important element of risk management in the securities markets.”

(This copy will be updated.)