Sebi accepted the settlement and said that after receiving the amount, the arbitration proceedings initiated against NSDL through a notice dated October 11, 2024, had been disposed of.
In the show cause notice, the market regulator had noted several operational and administrative shortcomings. Key observations included significant delays of up to 77 days in freezing accounts, despite guidance from the exchanges. In certain cases, NSDL was found to freeze promoter accounts even after receiving instructions to unfreeze them.
The regulator also pointed to cases where promoter accounts were frozen only after unfreeze instructions were issued, or where NSDL unfreezed entire Client Unpaid Securities Accounts (CUSA) instead of limiting the action to specific securities (ISINs) as prescribed by stock exchanges.
Sebi also raised concerns over vendor management and outsourcing arrangements. It said NSDL was backdating its outsourcing agreements with various suppliers. Further, the agreement with Tata Consultancy Services (TCS) for core IT activities was repeatedly postponed, including one instance where the contract for the period from April 1, 2019 to March 31, 2020 was executed a year after its expiry.
Moreover, Sebi highlighted systemic shortcomings. These include the lack of adequate system-level controls to ensure that securities were credited to the correct beneficial owners, failure to enforce timelines for the sale of unpaid securities after the fifth day of trading, and the ineffective implementation of the conversion of eligible demat accounts to Basic Services Demat Accounts (BSDA). Sebi, however, noted that NSDL had taken corrective action and identified defaulting officials in connection with the lapses.
This settlement comes months after NSDL resolved another case involving alleged violations of custody rules in October by paying Rs 3.12 crore to the regulator.
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