NSE Scandal- Former CEO Arrested
The CBI has arrested the former CEO of the National Stock Exchange of India. Chitra Ramkrishna has been arrested instead of a case that has been going on concerning unfair practices. She was taken into custody in New Delhi after her anticipatory bail was rejected by the court. She was the CEO of the NSE from 2013 to 2016. She was on the radar of CBI in respect to Anand Subramaniam who was an ex-employee of the National Stock Exchange.
The former CEO has been accused of sharing confidential information about the NSE with a yogi who lived in the Himalayas. She had been sharing this information with him via emails. It is under suspicion that the Yogi was none other than Anand Subramaniam. He was also arrested earlier this month. The case came in limelight after the acts of the SEBI.
The Securities and Exchange Board of India made its findings of the unfair practices going on at the NSE between 2010 to 2015. In the order passed by the SEBI, it claimed that it had documentary evidence that the former CEO has shared confidential information regarding the NSE with an unknown person. The correspondence was addressed to another email ID during 2014-2016. CBI officials had laid down that the stockbroker, Sanjay Gupta had access to the co-location facility of the National Stock Exchange.
Due to this, OPG Security Ltd., which is Sanjay Gupta’s firm, was able to access the market data before anyone else. The former CEO and employee of NSE were arrested in a co-location scam. Chitra was in lockup at the headquarters of the CBI. She was grilled by the CBI for three days continuously. CBI used the help of senior psychologists to question her. The psychologist responded that she was evasive in her responses. Therefore, the CBI arrested her.
Her plea for anticipatory bail was rejected by the special CBI Court in the said matter. Anand acted as advisor for Chitra & he was arrested before her in the same matter. Anand served as the group operating officer at the NSE. The co-location case pertains to the allegations of providing preferential access to the NSE’s algorithmic trading platform. Chitra was the CEO as well as the managing director from April 2013-December 2016 of the exchange group.
SEBI had charged her with governance lapse when she appointed Anand as her advisor. He was re-designated as the group operating officer as well. A fine of Rs. 3 crores were imposed on Chitra by SEBI. A fine of Rs. 2 crores was imposed on Anand, NSE, and Ravi Narain who is the CEO of the NSE. They were each fined Rs. 2 crores individually. A fine of Rs. 6 Lakhs is imposed on VR Narasimhan, the chief regulatory and compliance officer of the NSE.
This investigation was started in 2018 & after the order was passed by SEBI on the 11th of Feb, Anand was arrested. It was reported that Special Judge Sanjeev Aggarwal has commented that SEBI has been very kind to the accused. Chitra alleged that the spiritual guru at the Himalayas had steered her into appointing Anand as her advisor. SEBI claimed that Chitra had shared information regarding the NSE including the financial results, business plans, performance appraisals of the employees.
All this information was confidential and was not supposed to be shared with anyone. New facts had emerged in the case recently after that CBI had questioned Chitra. In 2018 Sanjay and his brother-in-law Aman Kakrady and Ajay Shah & other officials of the NSE were booked by the CBI. Unfair Access was provided to OPG Securities by unknown officials of the NSE by using the co-location facility.
This information was provided in 2010-2012. This information allowed the OPG to log in first to the server of NSE. Due to this, market data was provided to the financial service firm ahead of any broker as alleged in the FIR. Circulars were issued by the CBI against all these officials preventing all the officials from leaving the country. The arrest of Chitra is the second high-profile arrest under this case. the first arrest is of Anand.
The fact, that Anand is the yogi of the Himalayas, who was given all the confidential information by Chitra, came in an audit report by Ernst and Young. However, these investigating agencies have not concluded this fact. The confidential information given to the broker helped them with buying rack space for their servers. They gained faster access to the NSE data feed and the advantage of even a split second helped them with huge gains.
The information and access given to the OPG Securities Pvt. ltd. have helped them in gaining access to the servers that were least crowded during their access period. The allegations were first made in 2015 when a whistleblower wrote a letter to the SEBI to inform them about the illegal activities that are taking place. Then, a SEBI technical advisory committee report was formulated that found that OPG Securities had logged into the platform first several times.
They had logged in first on selected servers on most of the days from 2010 to 2014. It was also laid down in the report that they had access to the servers with better hardware. Gupta who was the head of OPG Securities has been claimed to bribe the officials of the SEBI. To receive the assessment in their favor. The appointment made by Chitra of her advisor, Anand, was carried out without following the HR procedures laid down. He was given salaries in crores and presented with disproportionate official powers.
The regulatory norms were not followed by Chitra while making these decisions. After the SEBI investigated the appointment of Anand, a box full of offenses was opened up. The weak corporate governance strategies of the NSE also came into the picture. The fine imposed on the former CEO is Rs. 3 crore which is less by 7% of the severance package allotted to her of Rs. 44 crore. The NSE was also charged by the DEBI with misconduct as they knew about the actions of the CEO but still did not take action against her. After this incident, NSE invited applications for a new CEO and managing director amid the allegations of governance lapses.
The vacancy was advertised in a newspaper which specified that the candidate must have at least 25 years of work experience. They should have a track record for strengthening corporate governance. The new CEO should know how to steer the launch of an IPO. The candidates should have exposure to operating a public listed company. SEBI has still not given its nod to the NSE to go public. The candidate should have a minimum of 5 years of experience in leadership roles like a CEO in a financial service sector.
The NSE is now seeking candidates with high ethical standards after the arrest of the former CEO. The last date to apply for the same is 25th March 2020 & the candidates are supposed to fulfill the eligibility requirements of the Companies Act, 2013 and SEBI regulations. The selection committee will nominate the candidates after a full background check. They will take every step with much precaution due to the fraud they have faced recently. The court had its doubts about the CBI.
The court laid down that the FIR and the reports had been lying around for a long time. No actions were taken against the accused. The CBI has taken action against them after so long. The accused had been roaming about freely. It was not acceptable on the part of the CBI & they are supposed to be more responsible towards their duties.