In a further cleaning-up operation in the capital markets, the Securities and Exchange Board of India has ordered an in-depth investigation into the nature of dematerialised accounts frozen by the depositories in January 2007.
Sebi has directed the depositories, National Securities Depositories Ltd (NSDL) and Central Depositories Services Ltd, to ask all the depository participants to examine the origin of such accounts which did not comply with the requirement for Permanent Account Number (PAN).
The investigation will primarily aim at tracing the origin of the accounts and the nature of transactions undertaken through these accounts when these were operational.
According to market sources, the investigation is aimed at examining whether such accounts were used by the market players to evade tax or for money-laundering. Around 30 lakh accounts were closed down due to Pan non-compliance, out of which 13 lakh have balances and remaining are no-balance accounts.
The investigation will cover both such accounts. The preliminary data available with the regulator has shown that there was no debit or payment of money from many such accounts. It is an inter-regulatory effort and data will be transferred to the respective authorities after the facts are clear, according to sources.
In January 2007, both NSDL and CDSL had closed down the dematerialised accounts which did not have Pan numbers.
For the convenience of the capital market players, the government had asked SEBI to rationalise the customer identification process by making PAN as the core number. This resulted in doing away with the numbers such as MIN for mutual funds, MAPIN for equity market and so on.