SEBI Fines NSE, Former Chiefs Chitra Ramkrishna, Ravi Narain

SEBI found anomalies in appointment of Anand Subramanian. It questioned sharing of confidential information with 'unknown person'.

A photograph taken outside the NSE Building in Mumbai. (Source: BloombergQuint)
A photograph taken outside the NSE Building in Mumbai. (Source: BloombergQuint)

The Securities and Exchange Board of India has imposed penalties on the National Stock Exchange of India Ltd. and its two former managing director and chief executives Chitra Ramkrishna and Ravi Narain, among others. The action by the market regulator follows alleged governance issues over the appointment of the chief strategic officer in 2013 as well sharing of confidential information by Ramkrishna with an unknown person.

The market regulator has imposed a penalty of Rs 3 crore on Ramkrishna, Rs 2 crore on Narain and another Rs 2 crore penalty each on NSE and Anand Subramanian. Subramanian first served as the chief strategic advisor and was re-designated as group operating officer. He was later advisor to MD and CEO of NSE from April 2015 to October 2016.

SEBI On Appointment Process Of Chief Strategic Advisor

The market regulator in its order said it received certain complaints between December 2015 and November 2016 against NSE, alleging governance issues in the appointment of Subramanian.

SEBI conducted an examination on the issue starting from the period when Subramanian joined NSE.

In its final order on the issue the market regulator noted that:

  • None of the other consultants appointed during that time received a compensation even remotely close to Subramanian‘s even though he had no relevant experience for the position.

  • There was only one candidate who was called for the interview.

  • The last drawn compensation of Subramanian before joining NSE was Rs 15 lakh per annum and he got appointed to NSE as a consultant with annual compensation of Rs 1.68 crore.

  • The compensation was more than full time employees who had far more relevant experience in the industry.

  • Even the subsequent increases in compensation were not on a rational basis and there was huge disparity in the increments given to Subramanian as opposed to the other consultants that were appointed during his time.

  • No pre-employment documents such as educational qualification certificate, experience certificate etc were handed over to the HR of NSE.

"Therefore, I note that a person who appears to have had no background or working experience of the securities market or stock exchanges or even of a technical background related to securities market, had been the only candidate called for an interview which took place only with Noticee no.1 (Ramkrishna) and not HR, was then appointed as Chief Strategic Advisor to Noticee no. 1, with no record of the interview proceedings or any notings," the SEBI order said.

The regulator came to a conclusion that the appointment of Subramanian by Ramrishna was arbitrary and not in compliance with NSE’s policies. The regulator said that Ramkrishna had failed to act with impartiality and misused the powers delegated to her in the appointment of Subramanian.

Sharing Of Information With Unknown Person

The SEBI order also dealt with alleged sharing of confidential information by Ramkrishna with an unknown person who she claimed was ‘’a spiritual force that has no physical co-ordinates.’’

The confidential information alleged to have been shared related to organisational structure; dividends; financial results etc.

The market regulator took note of Ramkrishna‘s statement that the unknown person was a spiritual force that could manifest itself anywhere it wanted and that she had been taking guidance from this force on many personal and professional matters.

A lot of intricate details on the functioning and hierarchy at NSE were known to the unknown person through Ramkrishna, who provided him the inputs, noted the SEBI order.

The market regulator said that there was no exception in regulations that allowed confidential information to be shared with a spiritual force.

It is unfortunate that the head of the leading and largest stock exchange in India has had to resort to such attempts to justify her actions of sharing confidential information pertaining to NSE with an unknown person.
SEBI order

The report concluded that this was a glaring breach of regulations and laws.

"Further, it begs to question the rational of Noticee no. 1 (Ramkrishna) for appointing Noticee no. 6 (Subramanian) as a Chief Strategic Advisor in NSE when they were both seeking advice and guidance from the same unknown person that they have both relied upon for the past 20 years," the order said.

It added that this only gives more credence to the findings that the appointment, delegation of power and increase in compensation of Subramanian was arbitrary and with ulterior motives or reasons.

In its order, SEBI has passed the following directions:

  • Apart from a Rs. 2 crore penalty, National Stock Exchange has been asked to not launch any new product for six months from the date of the order.

  • Chitra Ramkrishna and Anand Subramanian have been restrained from associating with any market infrastructure institution or SEBI registered intermediary for a period of three years from the date of the order.

  • Penalties of Rs. 2 crore and Rs 6 lakh have been imposed on two other individuals who were associated with NSE at the time.

SEBI has asked for the penalties to be deposited within 45 days from the date of the receipt of the order.