<b>IPO Scam</b>: Sebi imposes fine on CDSL, NSDL

The Securities and Exchange Board of India (Sebi) has imposed a fine of Rs 3 crore and Rs 5 crore on national depositories CDSL and NSDL respectively for negligence and lack of compliance in allotment of shares in the initial public offers (IPO) of many companies between 2003-05.

Key operators opened thousands of fictitious accounts through their depository participants (DPs) with CDSL and NSDL which caused losses to retail investors who had applied for the IPOs of various companies.

"The manner and ease with which fictitious accounts were opened, that too in large numbers by a coterie of entities, should have ordinarily alerted anyone. It is difficult to believe the same would have escaped the attention of CDSL," Sebi said in its order.

"Had NSDL ensured compliance of the account opening norms by its depository participants, the key operators would not have been in a position to subvert IPO process."

As many as 34,924 fictitious accounts were opened with DPs of NSDL and 21,698 with DPs of CDSL.

"Negligence on part of NSDL resulted in opening of large number of fictitious accounts by key operators which were used to corner the reserved portion for retail investors in IPOs of many companies," Biju S, adjudicating officer, Sebi said.

The market watchdog investigated the trading pattern in 21 IPOs, including Jet Airways, NTPC, IDFC, TCS, Yes Bank, Gokaldas Exports, ILFS Investsmart, Suzlon Energy and Shoppers' Stop, between 2003 and 2005.