Capital markets regulator SEBI on Wednesday levied a fine totalling Rs 75 lakh on Indian Clearing Corp Ltd (ICCL) and NSE Clearing Corp Ltd (NCL) for violating norms in the matter of Karvy Stock Broking Ltd (KSBL).
In two separate orders, the regulator slapped a fine of Rs 50 lakh on ICCL and Rs 25 lakh on NSE Clearing Corporation.
The order came after market watchdog initiated adjudication proceedings against ICCL and NSE Clearing Corp for alleged violation of provisions of SEBI's early warning mechanism (EWM) circular issued on December, 2018.
Under the EWM circular, alerts triggered at one stock exchange / clearing corporation/ depository through early warning mechanism shall be immediately shared with other stock exchanges / depositories with respect to the stock broker / depository participant.
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It was observed that National Securities Depository Limited (NSDL) sent various alerts pertaining to KSBL to ICCL and NCL during February-November 2019.
ICCL and NCL were required to process mis-match data received from depositories and finalise the alerts and forward the same to the exchanges for further necessary action to prevent diversion of client securities.
However, despite receiving relevant information from NSDL, ICCL and NCL failed to provide any alerts to NSE and BSE.
"I note that on account of alerts on mismatch of securities generated by depositories, by April 19, 2019, mismatches had been observed for securities reported by KSBL and actual balance in accounts of KSBL. Thus, after the relevant alerts were implemented post the EWM circular, by April 2019, the KSBL mismatches had been detected at National Stock Exchange (NSE)," SEBI's Adjudicating officer Maninder Cheema said.
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He also note that the material on record does not bring out that the failure to implement sharing of the alerts with BSE and NSE by ICCL and NCL's delayed detection of the wrong doing by KSBL.
The regulator also observed that both ICCL and NCL had partially complied with the EWM circular by compiling mismatch of securities received from depositories and sharing alerts with NSE.
Therefore, ICCL and NCL was mandated to share the mismatch alerts received from depositories (after compilation and finalisation) with the exchanges, in terms of the EWM Circular and its SOP.
However, they failed to do so and thereby violated the market norms.
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