Central Bureau of Investigation (CBI) on Friday issued lookout circular (LoC) against former Chief Executive Officer (CEO) and Managing Director of NSE Chitra Ramkrishna, her former boss Ravi Narain and her colleague Anand Subramanian.
The Income Tax Department on February 17, 2022, raided premises linked to Chitra Ramakrishna, the former NSE MD and CEO in Mumbai as part of a tax evasion investigation against her and others, official sources said. Officials said the searches are aimed to check charges of tax evasion and financial irregularities against her and others.
Chitra Ramakrishna Under CBI Lens
The National Stock Exchange (NSE), India’s leading stock exchange is under the radar of the markets regulator Securities and Exchange Board of India (SEBI). The four actors in this almost-fictional case are Chitra Ramakrishna and Ravi Narain, the former MDs and CEOs of NSE, Anand Subramaniam, the exchange’s group operating officer and advisor to MD and the NSE Board itself, whereas a mysterious ‘Yogi’ with whom Ramakrishna shared confidential information and intricate details regarding the functioning and Hierarchy at NSE is the villain in this case. Ramakrishna is also under fire for irregularities in appointing Subramaniam as the chief strategic advisor at NSE. Notably, Ramakrishna, who was appointed NSE’s MD and CEO in 2013 resigned from NSE in 2016, whereas Narain resigned a year later in 2017.
What is the National Stock Exchange (NSE) co-location case?
The NSE is facing allegations that some brokers got preferential access through the co-location facility at the stock exchange, early login, and ‘dark fiber’, which can allow a trader a split-second faster access to the data feed of an exchange. Even this infinitesimally sooner access is considered to result in huge gains for a trader.
In January 2015, a whistleblower wrote to SEBI alleging that a few brokers were able to log into the NSE systems with better hardware specifications while engaged in algorithmic trading, which allowed them unfair access and advantage.
The unfair access issue pertains to 2012-14 when NSE used to disseminate price information through a unicast system. In such a system information is disseminated to one member after another.
The whistleblower’s letter to SEBI alleged that sophisticated market manipulation has been taking place for several years at the NSE co-location centre. It also said that NSE had allowed non-empanelled Internet Service Provider (ISP) to lay fibre cables on its premises for few stock brokers.
What Action had SEBI Taken Earlier in the Case?
On April 30, 2019, SEBI came down heavily on NSE for alleged lapses in high-frequency trading offered through its co-location facility, directed the exchange to disgorge Rs 624.89 crore, and barred it from accessing the market for funds for six months.
SEBI also asked Narain and Ramakrishna to disgorge 25 per cent of their salaries drawn during a certain period. They were also prohibited from associating with a listed company or a market infrastructure institution, or any other market intermediary for a period of five years.
What Does the SEBI Report Say?
SEBI’s examination found that the said unknown person, Subramanian, had significantly influenced the decision making of Chitra Ramkrishna as reflected in the emails exchanged between Notice No. 1 and the unknown person, as perused by SEBI.
Thus, the SEBI examination found that NSE and its board were aware of such grave irregularities and misconduct on the part of Chitra Ramkrishna in the appointment of Subramanain in the NSE and the board meeting held on October 21, 2016, but did not record the aforesaid matter in the minutes of the meeting in the name of confidentiality and sensitive information and submitted the report on the above irregularities to SEBI only after repeated reminders.
When SEBI came to know that Ramkrishna was exchanging confidential information of NSE with an unknown person, SEBI vide letter dated May 3, 2018 and August 10, 2018 sought clarification from the NSE. The NSE submitted its detailed response on the above along with a report of forensic investigation conducted by Ernst & Young (E&Y) wherein it was concluded that the said unknown person was Subramanian.
CBI Questioning Chitra Ramkrishna
Look-out circulars were issued against Anand Subramanian, Chitra Ramkrishna and Ravi Narain for the ongoing investigation. All of them have been restrained from associating with any market infrastructure institution or any intermediary registered with the Securities and Exchange Board of India (SEBI) for three years, while Narain has been barred for two years.
The regulator said that despite being aware of the irregularities on the appointment of Subramanian, Narain and the NSE had not recorded the matter in the minutes of the board meeting in the name of confidentiality and sensitive information.
Also, SEBI has directed the NSE to forfeit the excess leave encashment of Rs 1.54 crore and the deferred bonus of Rs 2.83 crore, of Ramkrishna, which was retained by the exchange and deposit the money to its Investor Protection Fund Trust within six days. SEBI found that Subramanian was re-designated as the ‘group operating officer and advisor to the MD’ from April 2015 by Ramkrishna.
The mysterious ‘yogi’ is under the SEBI scanner now and the market watchdog has claimed to crack the identity of the ‘yogi’ within 15 days.
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