SEBI Imposes Rs 6-Crore Penalty On NSE For Multiple Omissions

The market regulator imposed a penalty of Rs 6 crore on the National Stock Exchange of India Ltd. for lack of disclosures, getting into areas where it's not allowed and not seeking prior permission when required.

The case stems from the Securities and Exchange Board of India's investigation into the direct and indirect acquisition of stake by NSE in six different entities between 1999 and 2016. These are: Power Exchange India, Computer Age Management Systems Ltd., NSEIT Ltd., NSDL E-Governance Infrastructure Ltd., Market Simplified India Ltd. and Receivables Exchange of India.

The investigation followed a letter by the Central Electricity Regulatory Commission, which sought confirmation if NSE had disclosed acquisition of stake in the Power Exchange. SEBI began probing NSE's acquisition of stake in CAMS after a newspaper report.

The regulator, in its observations, said:

• Power Exchange India: It's an electronic platform for trading of power by its members. Such activity is entirely different from NSE's functions of dealing in securities.
• CAMS: NSE's acquisition of 45% stake in CAMS involves conflict of interest. That's because CAMS provides back-end services to market participants and NSE is also a market infrastructure institution.
• NSEIT: Promoted by the NSE in 1999, it offers technology, consultancy and business analytics services. The stock exchange didn't seek prior approval of SEBI to carry out unrelated activities.
• NSDL E-Governance: The company offers technology infrastructure for e-governance projects of the government as well as certain consulting and business process re-engineering services to corporate clients. NSE failed to obtain SEBI's permission to continue holding a stake in the entity.
• Market Simplified India: NSE acquired 30% and transferred it to a subsidiary. MSIL provides a mobile trading platform for securities as well as mobile banking services. Such activities are beyond those undertaken by a stock exchange.
• Receivables Exchange: It provides online platform services for the Trade Receivable Discounting Systems platform. Since NSE acquired one of the promoters and nominated directors to the company's board, it can be said to have engaged in activities carried out by TReDS.

NSE argued that SEBI's charges were unclear. Also, regulations under which penalty was imposed were being applied retrospectively as some of the rules have been repealed, it said. NSE also cited a delay of four to 20 years from the actual event in initiating the proceedings.

Dismissing the arguments, SEBI imposed the penalty and directed the stock exchange to deposit the amount within 45 days.