In February this year, Supreme Court had expressing concerns over Sebi's outright rejection of a high-powered committee report probing the IPO scam of 2006 and NSDL's role in it. Moreover, the committee had given serious remarks over the manner in which SEBI was functioning and handled the entire episode. It noted that SEBI had failed to carry out its regulatory role adequately and recommended the market regulator to make a Code of Conduct for depositories.
The committee formed by Ministry of Finance passed three orders and found that NSDL had failed in its duty of supervising, investigating, monitoring data and directed it to conduct an independent inquiry to establish individual responsibility.
The Income Tax Department has started scrutinizing over 6.5 lakhs demat accounts, frozen by the two depositories, National Securities Depository Ltd and Central Securities Depository Services Ltd, on January 1, 2007, after investors failed to comply with the SEBI's directive to furnish details of their Permanent Account Number (PAN) while transacting in the financial markets.
The regulator is now on course to take action against few entities, who have been identified during the probe for their role in opening fictitious multiple demat and bank accounts to obtain allotment from the retail investors' quota.