The Securities and Exchange Board of India (SEBI) on June 28 found 18 entities, including former National Stock Exchange chief executive officer Chitra Ramakrishna, NSE COO Anand Subramanian, and the NSE, guilty of collusion in the 2015 dark-fibre case.
The capital market regulator imposed a cumulative penalty of Rs 43.8 crore on the 18 entities, with the NSE alone slapped a Rs 7-crore fine. NSE’s Chief Business Development Officer Ravi Varanasi has been fined Rs 5 crore, while Ramakrishna has been handed a penalty of Rs 5 crore.
Subramanian, who along with Ramakrishna is the subject of a government probe over alleged wrongdoings during their time at the country’s largest stock exchange, has been fined Rs 5 crore.
The order by SEBI Chief General Manager Suresh Menon came on a complaint received by the market regulator in 2015 that alleged irregularities in certain brokers availing point-to-point (P2P) dark fibre connectivity from Sampark Infotainment, which was the service provider for NSE’s co-location servers.
The 180-page order found that brokerages like Way2Wealth and GKN Securities benefitted from preferential access to the NSE facility in collusion with the stock exchange and its employees.
The order also stated that Sampark Infotainment was ineligible to lay down the dark fibre connectivity and was only licensed to maintain the network.
SEBI’s investigation found that the dark fibre cable was laid by Sampark Infotainment in such a manner that it resulted in Way2Wealth and GKN Securities having a latency advantage over brokers not using Sampark or those who were denied Sampark connectivity.
“Such an unfair advantage available with certain stock brokers is in contradiction to various regulations, recommendations and circulars issued in relation to the colocation facility emphasize on providing equal, unrestricted, transparent and fair access to all the brokers and all the participants without any bias or favor,” the SEBI order said.
The SEBI said that NSE adopted discriminatory policies during the co-location scam period. The order concluded that NSE gave preferential treatment to Way2Wealth and GKN Securities by allowing them to engage a non-eligible entity Sampark for P2P connectivity at NSE Colocation.
The order went on to say that being MD and CEO of NSE, Ramakrishna couldn't absolve herself from the liability arising out of malpractices, fraudulent activities and lacunae pertaining to a sensitive matter such as a co-location facility.
Ramakrishna argued that she couldn't be blamed as she did not deal with NSE colocation or the P2P connectivity network.
SEBI also found Subramanian equally liable, dismissing his argument that he was not a key managerial personnel at the company despite being the promoter to Group Operating Officer and adviser to the MD.“I am of the view that Subramanian is equally liable for the actions and inactions on the part of NSE and the MD & CEO of NSE with respect to P2P connectivity,” Menon said in his order.