Description

SEBI settlement order against National Securities Depository Limited (NSDL) for alleged violations of various regulatory provisions identified during FY 2023-24 inspection.

Summary

SEBI issued Settlement Order No. SO/SM/RG/2025-26/8259 against National Securities Depository Limited (NSDL) in connection with adjudication proceedings initiated under Section 15-I of the SEBI Act, 1992. The proceedings relate to alleged violations identified during the inspection of NSDL conducted during FY 2023-24. NSDL (PAN: AADCN9802F) filed Settlement Application No. 8259/2024 to resolve the matter through SEBI’s settlement mechanism.

Key Points

  • Adjudication proceedings initiated against NSDL under Section 15-I of SEBI Act, 1992
  • Shri Amar Navlani appointed as Adjudicating Officer on September 25, 2024
  • Settlement application filed by NSDL (Application No. 8259/2024)
  • Violations identified during FY 2023-24 inspection of NSDL operations
  • Multiple regulatory provisions allegedly violated across different operational areas
  • Proceedings conducted under both SEBI Act, 1992 and Depositories Act, 1996

Regulatory Changes

No new regulatory changes introduced. This order pertains to enforcement of existing regulations.

Compliance Requirements

The settlement order addresses alleged violations of the following regulatory provisions:

1. LODR and Corporate Governance

  • Clause 6 of Annexure I of SEBI Circular SEBI/HO/CFD/CMD/CIR/P/2020/12 dated January 22, 2020 (issued under Section 11A(2) of SEBI Act, 1992, read with Sections 9 and 21 of SCRA Act, 1956 and Regulation 98 of SEBI LODR Regulations, 2015)

2. Investor Grievance Redressal

  • Clause 17 of SEBI Circular SEBI/HO/OIAE/IGRD/CIR/P/2020/152 dated August 13, 2020 (issued under Section 11(1) of SEBI Act, 1992)

3. Code of Conduct

  • Regulation 17 read with Clause (1) and (5) of Code of Conduct as specified in Part D of Third Schedule of D&P Regulations, 2018 (applicable till August 27, 2023)
  • Issued under Section 30 of SEBI Act, 1992, read with Section 25 of Depositories Act, 1996

4. Depository Participant Operations

  • Clause 2.i. of SEBI Circular CIR/MRD/DP/19/2015 dated December 09, 2015, read with Clause 5 of Annexure I of SEBI Circular CIR/MIRSD/24/2011 dated December 15, 2011
  • Clause 4(d) & 8 of SEBI Circular CIR/MRD/DP/22/2012 dated August 27, 2012
  • Clause 5 of SEBI Circular CIR/MRD/DP/21/2014 dated July 1, 2014
  • Clauses 3, 4 & 5 of SEBI Circular CIR/MRD/DP/20/2015 dated December 11, 2015

5. Proof of Documentation

  • Clauses 3.4, 3.5, and 5 of SEBI Circular SEBI/HO/MIRSD/MIRSD-PoD-1/P/CIR/2022/153 dated November 11, 2022

All circulars issued under powers conferred by Section 11(1) of SEBI Act, 1992, read with Section 19 of Depositories Act, 1996.

Important Dates

  • FY 2023-24: Period during which NSDL inspection was conducted
  • September 25, 2024: Appointment of Adjudicating Officer (Shri Amar Navlani)
  • December 2025: Settlement order issued

Impact Assessment

Market Infrastructure Impact: As a settlement order against NSDL, one of India’s two depositories handling securities holdings for millions of investors, this order has significant implications for market infrastructure governance and compliance standards.

Regulatory Enforcement: The order demonstrates SEBI’s continued focus on ensuring depositories maintain high standards of compliance across multiple operational areas including investor grievance redressal, depository participant oversight, and regulatory reporting.

Settlement Mechanism: NSDL’s use of SEBI’s settlement mechanism (rather than contesting the adjudication) suggests acknowledgment of the violations and willingness to resolve the matter expeditiously.

Operational Areas Affected: The violations span multiple critical functions:

  • Corporate governance and LODR compliance
  • Investor grievance redressal mechanisms
  • Code of conduct adherence
  • Depository participant operations and oversight
  • Documentation and proof of delivery requirements

Systemic Implications: Given NSDL’s critical role in India’s securities market infrastructure, compliance lapses even if historical can have systemic implications for investor protection and market integrity.

Impact Justification

Settlement order against major market infrastructure institution NSDL involving multiple regulatory violations across depository operations, LODR compliance, and investor grievance handling. High importance due to systemic nature but medium impact as it addresses past violations through settlement rather than ongoing market disruption.