Sebi fines CDSL, NSDL for lapses in IPO allotment

The Securities and Exchange Board of India (Sebi) has imposed a fine of Rs 30000000 on the Central Depository Services (CDSL) and Rs 50000000 on National Securities Depository (NSDL), alleging “various lapses and irregularities” on their part, which resulted in distortion in allotment during recent IPOs.“It is alleged that the said entities (key operators) had opened many demat accounts in fictitious and benami names and made a large number of applications in the IPOs in the category reserved for retail investors,” an order said.According to Sebi, as many as 34,924 different accounts were opened with depository participants affiliated to NSDL, and 21,698 afferent accounts were opened with depository participants affiliated to CDSL. As part of the investigation, Sebi checked the trading pattern in 21 IPOs including TCS, Jet Airways, Yes Bank, NTPC, IDFC, between 2003 and 2005.Detailing the process of the irregularity, Sebi said “On allotment of shares in the category of retail investors in the IPOs, the said shares were transferred to the demat accounts of these key operators.”“It is alleged that these key operators subsequently transferred the shares through off-market deals to ultimate beneficiaries who appeared to be the financiers in the process. In this regard, it is alleged that the said practice was adopted to corner the quota for retail investors in the IPOs of the companies,” it added.