The Securities and Exchange Board of India (SEBI) has barred the National Stock Exchange (NSE), which is the country's largest exchange in terms of market share, from launching any new product for a period of six months.
The capital market regulator has also barred its former MD & CEO Chitra Ramkrishna from being associated with any market infrastructure institution - stock exchange, depository, clearing corporations - or any other SEBI-registered entity for a period of three years.
Further, former MD & CEO Ravi Narain has also been barred in a similar manner for two years. Both the former MDs, along with a few others, have also been imposed monetary penalties.
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The SEBI action has come following a detailed probe in the manner of appointment of Anand Subramanian, who joined NSE as Chief Strategic Officer in April 2013 and within two years was re-designated as Group Operating Officer (GOO) and Advisor to MD.
The period also saw his compensation jumping from Rs 1.68 crore to Rs 3.33 crore. Incidentally, his annual compensation before joining NSE was only Rs 15 lakh when he was working as VP Leasing & Repair Services of Transafe Services Limited, a subsidiary of Balmer & Lawrie.
In a 190-pages order issued late on Friday, the capital market regulator stated that the previous experience of Subramanian "was not relevant to the position for which he was appointed" and "frequent, arbitrary and disproportionate increases in the compensation" were granted by Ramkrishna.
The SEBI order has also highlighted the fact that Subramanian's appointment was approved by Ramkrishna even as the "position of Chief Strategic Advisor was neither advertised nor any other person considered for the position" and the annual compensation of Rs 1.68 crore was given for working part-time as a consultant for four days in a week.
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The SEBI investigation was triggered by complaints received in 2015 and 2016, which, among other things, alleged that there was no employment documentation and Subramanian was directly posted as a consultant to MD with an "unequal pay of more than Rs 4 crore per annum higher than most of the seniors at NSE."
Incidentally, the SEBI probe into the co-location facilities of NSE also found that Ramkrishna shared "certain internal confidential information of NSE" with an unknown person.
While SEBI has directed NSE to forfeit the excess leave encashment of Rs 1.54 crore and the deferred bonus of Rs 2.83 crore of Ramkrishna that was retained by NSE, it has also imposed a monetary penalty of Rs 3 crore on the former MD & CEO.
Further, NSE, Subramanian and Narain have also been imposed a monetary penalty of Rs 2 crore each while former Chief Regulatory Officer and Compliance Officer of NSE, V R Narasimhan has been penalised Rs 6 lakh.
The said order relates to certain issues at NSE during the period 2013-2016 and is therefore almost 6-9 years old. In this regard, over the last few years, there have been several changes at the board and management level at NSE.
SEBI has also instituted various changes in the governance structure of market infrastructure institutions (MIIs) including board committee structures and oversight, tenor of management, accountability for lapses at MIIs etc. which have strengthened the control environment of MIIs. SEBI has been closely monitoring and supervising the operations of NSE and other MIIs.
NSE has operationalised the directives of SEBI on various matters over the years and has taken various measures to further strengthen the control environment including the technology architecture.
We wish to reiterate that NSE is committed to the highest standards of governance and transparency and will extend full co-operation to the regulator for a satisfactory closure of the matter.
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