Question

To recover the national loss suffered by small investors in the IPO allotment scam from the National Securities Depository Services Ltd, Central Depository Services Ltd, and eight depository participants, a second interim order was passed by

• A. SEBI
• B. RBI
• C. FMI
• D. Supreme Court

Hint:

Think about which regulator oversees India's stock and depository system.

Answer 1

The Correct Option is A

Step 1: Understanding the Question:
The question refers to the IPO allotment scam of 2005-06, in which some people used many fake demat accounts to grab a larger share of shares meant for small retail investors.

Step 2: Key Fact or Approach:
In India, the securities market, including how shares are issued and allotted in an IPO, is regulated by the Securities and Exchange Board of India (SEBI).

Step 3: Detailed Explanation:
When the scam came to light, SEBI investigated National Securities Depository Ltd (NSDL), Central Depository Services Ltd (CDSL), and several depository participants for allowing large numbers of benami (fictitious) demat accounts to be opened.
SEBI passed interim orders against these entities and individuals to freeze the illegal gains and protect the interests of genuine small investors, since this falls squarely within its role as the market regulator.
The Reserve Bank of India (RBI) regulates banks and the currency system, not the securities and IPO allotment process, so it would not be the body passing such an order.
"FMI" is not a recognised regulatory authority connected to this case, and the Supreme Court only steps in when a case reaches it through litigation, not as the primary regulator issuing interim market orders.

Step 4: Final Answer:
The second interim order in the IPO allotment scam was passed by SEBI, so option (A) is correct.