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

This question tests knowledge of the IPO allotment scam and which authority acted to protect small investors who lost out because of it.

1. SEBI: Correct. As India's securities market regulator, SEBI investigated the misuse of multiple demat accounts by a few operators to corner IPO shares meant for retail investors, and it passed interim orders against NSDL, CDSL, and the depository participants involved.
2. RBI: The Reserve Bank of India oversees banks and monetary policy. Depository participants and IPO allotments fall outside its direct jurisdiction.
3. FMI: This is not an established Indian financial regulatory body relevant to securities markets, so it does not fit here.
4. Supreme Court: The judiciary steps in mainly to hear appeals or disputes brought before it, not to issue the primary regulatory interim orders in a market matter like this one.

The correct option is SEBI, since it is the designated regulator for India's securities market and the body that actually passed the interim orders in this case.

Let's summarize:

• The IPO allotment scam involved misuse of demat accounts to unfairly grab retail investor shares.
• SEBI, as the securities market watchdog, passed interim orders against NSDL, CDSL, and the depository participants.

So the second interim order to recover the small investors' losses was passed by SEBI.