Market regulator Securities and Exchange Board of India (SEBI) has taken a serious view of the overall conduct of Central Depository Services (India) Ltd (CDSL) and its former chief PS Reddy for delaying the appointment of a new chief at the Depository.

The regulator has specifically flagged two governance issues — delay in framing the nomination and remuneration policy (NRP) and the delay in the commencement of the process of appointment of new MD & CEO — in its recent communication to CDSL. Such delay has eventually resulted in the depository functioning without an MD & CEO till date, SEBI said in the letter.

In the communication to CDSL, seen by BusinessLine , the market regulator has also advised the CDSL board to take appropriate action against the former MD and CEO, including holding back the deferred portion of variable compensation payable for FY2018-19.

SEBI has advised CDSL to take due care in future and improve its compliance standards to avoid recurrence of such instances, failing which action may have to be initiated against it. CDSL did not respond to a query from BusinessLine but sources in the company said the SEBI letter will be put before the board for necessary action.

When contacted, Reddy said that he was not aware of the SEBI communication.

“I will check with CDSL next week. I am not aware of the letter and neither has SEBI asked me for any clarification,” he said.

The Depository has also been advised to place SEBI’s letter before its Governing Board along with the details of concrete steps taken by the management to strengthen the standards of regulatory compliances. BusinessLine first reported about the governance issues at CDSL on April 3.

CDSL has been advised to submit an action taken report on SEBI’s letter, dated September 11, 2019, within 30 days.

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