The Securities and Exchange Board of India on Friday lifted the ban on three depository participants - IL&FS, IDBI Bank and ING Vysya Bank [Get Quote] - on opening fresh demat accounts.

The capital market watchdog had banned these three depository participants from opening fresh demat accounts on April 27 for their alleged role in the initial public offer allotment scam.

In his "prima facie" findings, Sebi whole-time member TC Nair directed the lifting of the ban on three agencies in three separate orders. The three entities were banned for facilitating opening of demat accounts in fictitious names and cornering the retail portion of shares in IPOs.

Earlier, in the last week of May, Sebi allowed Karvy Stock Broking to continue to service its existing depository participants accounts, though the embargo on new DP accounts continued.

Karvy was also allowed to continue with its mutual fund registry work, including new fund offers, but was barred from taking up any new initial public offer work till the inquiry was over.

A day after passing the order, Sebi also had lifted the ban against Indiabulls [Get Quote] Securities "on the basis of oral and written submissions" made by the company officials.

It also had to issue a clarification that it was not banning client transactions of indicted brokers soon after its first order, clarifying that its ban applied only to proprietary trading.

The regulator also had to face legal trouble with the IPO order when the AP and Gujarat high courts overrode its orders.

Sebi had in April barred 24 key operators from operating in the stock markets and banned 12 DPs from opening fresh accounts for their involvement in the IPO scam. The order followed an investigation of abusive practices in 105 IPOs floated between 2003 and 2005.

"The present order gives only a prima-facie finding as to the necessity of passing the interim directions at this stage and accordingly all issues and contentions are left open to be considered by the inquiry officer and to be decided in subsequent proceedings pursuant to his report," Nair said in his orders.

Sebi said the earlier prohibition was preventive and not the punishment for letting fraudulent accounts be opened, and can now be set aside without damage.

ING Vysya was accused of opening 544 false accounts and sharing of common address by 1,075 demat account holders, while IL&FS was accused of opening of 3,421 multiple demat accounts of CDSL sharing common address.