Why this commentator says Sebi’s NSE order is a 'letdown', lost opportunity

The new standard-operating procedure (SOP) was set in place through a Sebi circular dated July 5, 2021.

The Securities and Exchange Board of India's (SEBI's) recent order, which settled the tech-glitch-led hours-long shutdown in trading on February 24, 2021, is a letdown, a commentator on market regulations has said.

The National Stock Exchange of India (NSE) and NSE Clearing (NCL) had to pay over Rs 72.64 crore and a non-monetary penalty was imposed on the institutions’ senior executives.

Sebi's June 20 order said that NSE’s former managing director and chief executive officer Vikram Limaye, NCL’s MD Vikram Kothari and NSE’s chief technology and operations officer Shiv Kumar Bhasin would have to take the necessary exams/courses and commit to at least 14 days of community service over the next year. The service should be towards investor education and awareness.

“Huge blow? Not really,” tweeted Aseem Juneja, founder of The Digital Blogger. “Post that blunder, SEBI came up with a penalty clause that if in future that happens NSE must pay 10% of its revenue average off last 2 years.”

NSE’s average revenue was over Rs 2,700 crore in FY20 and FY21. This should translate to a penalty of Rs 270 crore in keeping with the standard-operating procedure (SOP) set in place by Sebi circular of July 5, 2021.

As per SOP, the MD and CTO would have to shell out 10 percent of their yearly salary or Rs 2 crore, The Digital Blogger said.

“Yes, this declaration (the SOP) came later for future incidents but at least penalties must have had some standards. But NSE and NCL were penalised mere 2.5 percent of their average yearly revenue,” he tweeted. “The penalty on the MD and CTO of NSE/NCL is laughable.”

Also read: Sebi orders back-to-school, community services for exchange, clearing house chiefs

Juneja said despite the high bar it sets with the guidelines and rules, Sebi fails when it comes to cracking down on the big players.

“SEBI sets high benchmarks in its Regulations and guidelines but when it comes to nailing the big fish, the penalties are majorly philosphical and no high benchmarks are set,” he tweeted.

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Juneja said this was an opportunity wasted. “For the same reason, no huge penalties are seen when a stockbroker’s app gets shut down and the broker just sends out notifications to its clients with some reasoning that is beyond the understanding of a normal retail trader,” he wrote.

“This was one good opportunity for SEBI to show the industry to be serious about their workings and there is no big fish than NSE. But, it was just another letdown.”