THE BOARD OF THE National Stock Exchange (NSE) “failed” to notify the market regulator Securities and Exchange Board of India (SEBI) despite “having knowledge of serious irregularities and misconduct” on the part of its then CEO, Chitra Ramkrishna and instead of acting against her, let her out with glowing praise.

When she resigned on December 2, 2016, NSE’s board was chaired by former finance secretary Ashok Chawla and included former executive director of Sebi Dharmishta Raval, former Supreme Court justice BN Srikrishna , Former Corporate Affairs Ministry Secretary Naved Masood, KPMG Former India Deputy Managing Director Dinesh Kanabar, Manipal Global Education Services Chairman Mohandas Pai, Atlantic General Advisory Director Abhay Havaldar, Azim Premji Investment CIO Prakash Parthasarathy, as well as Ravi Narain, vice president, and Ramkrishna herself.

According to Sebi, even after knowing that Ramakrishna depended on the advice of an “unknown person” when making important decisions, the NSE board allowed him to “exit by resignation” and recorded the appreciation during of the meeting of the Board of Directors held on December 2, 2016. , for his “decisive contribution to the growth of the organization”. The comments came after the regulator heard responses from NSE and Ramkrisna to show cause notices sent in October 2019 and December 2019.

Kanabar, Pai and Masood joined the company’s board in July 2016, five months before Ramkrishna stepped down. Chawla became chairman of NSE in May 2016 after former LIC leader SB Mathur completed a three-year term as chairman of NSE.

Anand Subramanian, a former Group Operating Officer and Advisor to MD, whose appointment created controversy, joined NSE during Mathur’s tenure. This appointment by Ramkrishna was arbitrary and not in line with NSE policies. Additionally, she shared confidential information with an “unknown person” and deceived NSE by telling it that the unknown person was a “siddha-purusha”.

According to a former director of NSE who was on the board when Ramkrishna resigned, it was around August 2016 that SEBI contacted the board, pointing to alleged transgressions involving Subramanian’s appointment and remunerations which been informed to the regulator by anonymous letters.

Following SEBI’s communication, in which it asked the board to investigate the matter, the board set up an investigation committee headed by its audit committee chair Dinesh Kanabar. “We found that there was a gross abuse of power by the CEO (Ramkrishna) by paying high compensation to Subramanian for four years. had been approved by the CEO,” the former director said on condition of anonymity.

In October 2016, the council met and decided that Subramanian should leave. Subramanian’s departure, according to the former director, created a rift between Ramkrishna and the board.

After the COO’s exit, the council commissioned a forensic investigation by Ernst & Young which investigated suspicious emails sent by Ramkrishna regarding Subramanian’s appointment and compensation. Based on the EY report, the board confronted Ramkrishna, which resulted in his resignation on December 2, 2016, according to the former NSE board director.

At that time, however, the company said she quit for “personal reasons”.

Contacted by The Indian Express, Justice BN Srikrishna, who was appointed Public Interest Director at NSE in August 2013 and resigned after his three-year term, declined to comment. Chawla and Kanabar did not respond to calls and text messages seeking comment.

NSE and its Board of Directors were aware of Ramkrishna’s exchange of confidential information with an unknown person with email id [email protected] during its meeting on November 29, 2016. “However, NSE and its board of directors had made a conscious decision not to report the matter to SEBI and to keep the matter secret,” SEBI said.


Lack of corporate governance

A stock exchange is a first level regulator. The fact that the NSE board has become aware of “serious irregularities” in the conduct of its former CEO and managing director underscores the need for far greater checks and balances.

According to the SEBI order dated February 11, 2022, NSE’s failure to provide the information to SEBI even after repeated reminders, failure to appoint Subramanian as a Key Management Person (KMP) and “concealing information to SEBI demonstrates non-deference to SEBI’s advice and indifference to the provisions of the law”.

“NSE failed to administer the scholarship with professional competence, fairness, impartiality, efficiency and effectiveness; failed to maintain the highest standards of personal integrity, sincerity, honesty and courage in the performance of his duties and engaged in acts dishonorable to his responsibilities; have not performed their duties independently and objectively; and failed to carry out their duties with a positive attitude and constructively support open communication,” SEBI said.

The regulator highlighted how Ramkrishna has even taken initiatives to raise the bar of corporate governance standards. While companies whose securities are listed with the NSE are required to comply with corporate governance standards, it has taken a step forward by launching a new corporate governance initiative, “NSE Prime”, in under which higher standards of corporate governance have been prescribed for listed companies.

EY’s report on the incident states that only desktops attributed to Ramkrishna and Subramanian were imaged/verified, and laptops attributed to NSE and Subramaniam were not available for forensic imaging as they were disposed of as electronic waste, the regulator said.

Whenever public interest administrators see a major regulatory failure in the operation of the exchange, they must report it to SEBI, the regulator said. However, this was not done in this case. Moreover, by allowing Ramkrishna to simply resign and taking no action against her, NSE failed to act in the interests of the securities market, resulting in the failure of its key responsibilities, SEBI said. .

(With contributions from AASHISH ARYAN and SUNNY VERMA in New Delhi)

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