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CS Executive · Capital Market and Securities Laws · Laws Governing Depositories and Depository Participants

A registrar to an issue, registered with SEBI as an intermediary, delays dematerialisation of an investor's securities beyond the time allowed. Which statement about the penalty under Section 19D of the Depositories Act, 1996 is correct?

Section 19D makes the issuer, its agent or a SEBI-registered intermediary liable to a penalty for delay in dematerialisation, calculated for each day the failure continues and capped at a maximum of one crore rupees. It is not limited to issuers.

  1. AThe intermediary is liable to a penalty, subject to a maximum of one crore rupeesCorrect
  2. BOnly the issuer company can be penalised, never its agent or an intermediary
  3. CThe penalty is a fixed one lakh rupees irrespective of the duration of default
  4. DThere is no monetary penalty; only the registration can be suspended

Explanation

Section 19D covers an issuer, its agent or a registered intermediary that fails to dematerialise within the time specified or abets delay. The penalty is calculated per day of continuing failure, subject to a maximum of one crore rupees. So it is neither limited to issuers nor a flat one-off sum.

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