Explained | SEBI’s order against former NSE CEO Chitra Ramkrishna

SEBI’s order also reminded of the Bombay High Court’s observation in the MCX Stock Exchange vs SEBI (March 2012)dispute that referred to the exchanges the “first layer of oversight”

February 21, 2022 11:02 pm | Updated February 27, 2022 12:47 am IST

National Stock Exchange (NSE)’s former Managing Director (MD) and Chief Executive Officer (CEO) Chitra Ramkrishna. File

National Stock Exchange (NSE)’s former Managing Director (MD) and Chief Executive Officer (CEO) Chitra Ramkrishna. File | Photo Credit: REUTERS

The story so far: National Stock Exchange (NSE)’s former Managing Director (MD) and Chief Executive Officer (CEO) Chitra Ramkrishna is accused of misusing her office for making inapt appointments, failure to conceal confidential information pertaining to operations of the exchange, and making incorrect and misleading submissions to the Securities and Exchange Board of India (SEBI). The regulator states that her unknown spiritual guru influenced her decision making.

The Central Bureau of Investigation (CBI) has questioned her and issued lookout circulars against the former CEO, her predecessor Ravi Narain and former Group Operating Officer (GOO) Anand Subramanian.

What are the allegations against Chitra Ramakrishna?

Ms. Ramkrishna was appointed the MD and CEO of the exchange on April 1, 2013. She appointed Mr. Subramanian as the Chief Strategic Officer (CSO) of the exchange despite the latter not having any exposure to capital markets. He worked as the Vice President of Leasing and Repair Services at Transafe Services Pvt Ltd, a wholly owned-subsidiary of Balmer & Lawrie.

SEBI notes that Mr. Subramanian’s previous work experience was not relevant to his new consultancy position at NSE. His annual salary at his previous workplace was ₹15 lakh, which rose significantly to ₹1.68 crore at NSE. Moreover, he was expected to work four days a week. With recurrent appraisals and performance ratings, his compensation rose to ₹4.21 crore within two years. He was now asked to work for five days a week and was re-designated as the GOO and Advisor to MD. 

SEBI notes that the exchange had not advertised any vacancy pertaining to the appointment of CSO.

The regulator found the former NSE Chief guilty of divulging confidential information pertaining to the NSE’s organisational appointments, financial results and projections, dividend pay-out ratio and board meeting consultations to her unknown spiritual guru.

The NSE Board was found guilty of not informing the markets regulator and opting to keep it under wraps. It asked Ms. Ramkrishna to surrender her office in December 2016 and Mr. Subramanian on October 2016.

Has SEBI established who is the spiritual guru?

SEBI’s order said, drawing reference from a forensic investigation report by Ernst & Young (E&Y), that the spiritual guru was Mr. Subramanian. The regulator informed that NSE too concurred with the assertion. E&Y’s finding are based on an examination of Skype accounts by the name ‘anand.subramanian9’ and ‘sironami.10’ found on his work computer and the documents of the unknown spiritual guru. The documents were last edited by Mr. Subramanian. 

However, both Ms. Ramkrishna and Mr. Subramanian have denied the claim. She continues to contend that the unknown spiritual guru is a “siddha-purusha” or a “paramhansa”. 

According to the former NSE Chief, the spiritual guru has no physical coordinates and would manifest at will. She met him nearly twenty years ago on the banks of the Ganga where the ‘paramhansa’ gave her the email-ID for future correspondence.

SEBI disagrees. It argues that the unknown person is a physical being and the former NSE Chief had been on vacations with him to “chill”.

Is the CBI already examining the former NSE chief?

The former NSE Chief is being examined for a case registered in May 2018 pertaining to alleged abuse of a trading software of the exchange. The case lists stock broker OPG Securities and its owner Sanjay Gupta and unknown officials of SEBI and the NSE as the accused. 

With the help of the data centre employees of the NSE, Mr. Gupta is believed to have got access to the exchange’s back-up server. This facilitated early flow of information to the brokers, thus making undue gains. According to The Hindu Businessline, the brokers held the unfair access between December 2012 to May 2014.

The larger perspective

The Bombay High Court in its verdict on the MCX Stock Exchange vs SEBI (March 2012)dispute had stated that exchanges provide “first layer of oversight”. “As self-regulatory organisations, stock exchanges have a front-line responsibility for regulation of their markets and for controlling compliance by members of rules to which they are subject,” the order read. 

The order added that market surveillance carried out by stock exchanges in certain jurisdiction regulate issuers. They ensure that stocks are reliably traded and that issuers meet standards of corporate governance.

“Stock exchanges as institutional mechanisms have an important role to play in ensuring the stability of the financial and economic system,” the Bombay HC order had said.

In that light, Ms. Ramkrishan as the then-NSE chief is accused of financial misleading, concealing of information and improper conduct. 

Has SEBI taken action? 

Ms. Ramkrishna has been forbidden from dealing in stocks, depositories, intermediary or clearing corporations for a period of three years, alongside a penalty of ₹3 crore.

Mr. Subramanian has been restrained from associating with any market infrastructure institution or an intermediary for three years. He would also have to pay a penalty of ₹2 crore.

NSE has been ordered not to launch any new product for the next six months. Additionally, it has been directed to forfeit the excess leave encashment of ₹1.54 crore and the deferred bonus of ₹2.83 crore, owed to Ms. Ramkrishan but retained by the exchange. The regulator ordered the exchange to deposit the same in its Investor Protection Fund Trust.

The other three entities, along with Mr. Narain, the then President and company secretary J. Ravichandran, erstwhile Regulatory Officer J Ravichandran of being in violation of Section 15HB of the SEBI Act (1992) and Section 23A and 23H of the Securities Contract (Regulation) Act, 1956.

Both NSE and Mr. Narain have been asked to pay a penalty of ₹1 crore.

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