The best-laid plans of the Securities and Exchange Board of India (SEBI), the National Stock Exchange (NSE), the finance ministry and large institutional investors looking for a big, post-listing pay-off have been disrupted by a formless Himalayan yogi/siddha purush, with an email ID ([email protected]), who apparently dictated the actions of Chitra Ramkrishna, former managing director (MD) and chief executive officer (CEO) of the NSE. Many would say: that is how karma works.
The shock, and ridicule, this has attracted globally, has impelled the government to reactivate the Central Bureau of Investigation’s (CBI’s) 2018 investigation into the algo scam thereby transferring primary responsibility for the investigation away from the regulator. CBI has widened the scope of its investigation in a big way and is questioning past and present employees of the NSE involved with co-location (Colo) and technology as well as SEBI officials.
The CBI now needs to ensure that the findings of the two ongoing investigations, which are key to exposing the size of the algo scam and extent of mis-governance at the NSE, are released at the earliest. The first investigation by the Indian School of Business (ISB), Hyderabad, is to quantify the extent of profiteering by brokers involved in the Colo scam. The second, headed by justice (retd) Aravind Sawant, is into how select brokers, with the help of a technology consultant, were able to bypass the trade access point (TAP) and get a larger number of orders/messages to the NSE’s trading system, leading to higher profits.
For the first time after the Himalayan yogi issue blew up, finance minister (FM) Nirmala Sitharaman has finally broken her silence on the algo scam and told a newspaper that the government is examining if “SEBI took adequate action in the NSE matter.” If one assumes that it is CBI that will look at SEBI’s role, the agency would do well to examine the issues listed below, in addition to ongoing investigations.
Remember, Moneylife exposed the algo scam in 2015 by publishing an anonymous whistle-blower’s letter. SEBI began to investigate the issue only after NSE filed a defamation case against us. Until then, it had accepted NSE’s explanation and filed away its response.
•Examine why SEBI is so keen on clearing NSE’s initial public offering (IPO) even though key investigations are incomplete. In August 2021, NSE’s annual report declared that it would re-apply for the IPO even though all appeals and several investigations are pending. My sources say that whole-time member (WTM) Anant Barua, even while issuing the 11th February order on the Himalayan guru, had submitted a 9-page note which makes a legal case for permitting NSE to go ahead with its IPO, despite pending investigations. Persons with knowledge about the note say that he has cited case law and international precedents to argue that regulatory issues faced by market infrastructure institutions (MIIs) ought not to prevent their listing. This seems to deliberately downplay the scam and mis-governance at NSE for a decade and the role of its board of directors in delegating enormous powers to individuals without checks & balances.
•Enquire about the NSE board’s silence over the appointment of Anand Subramanian, the failure to identify him as a key management person (KMP) to the regulator and various averments by board committees, during the algo scam investigations, about NSE’s ‘flawless’ technology.
•Role of the NSE board in creating a non-existent designation for Ravi Narain (as non-executive vice-chairman) to allow him to continue as a director on the Exchange, all its key committees and a clutch of highly profitable NSE subsidiaries. It should also examine the controversial appointment of Chitra Ramkrishna by doctoring processes and without any attempt by the appointments committee to look at any other eligible candidate. In retrospect, it is clear that she was the wrong person for the job, despite her claim to be a founding team member.
•Role of SEBI and NSE in facilitating the smooth exit of Ravi Narain, Chitra Ramkrishna and Anand Subramanian without recording details in the board agenda, notice or minutes. The interim board sent to clean up the Exchange (Ashok Chawla, Dinesh Kanabar and Mohandas Pai) is understood to be getting legal help and plans to write to the regulator clarifying its actions.
•CBI needs to examine claims that the NSE board had kept SEBI and its chairman informed about their actions and findings which are contrary to the SEBI order saying the regulator was kept in the dark. Did SEBI call for details about the resignation of Chitra Ramkrishna and Anand Subramanian or convey its displeasure about the NSE board’s weak action against them, prior to the passing reference to the role of the board in the order of 11th February?
•I understand that the NSE board of directors, in 2016, had acted under legal advice of the law firm of the erstwhile Amarchand & Mangaldas with direct inputs from its two senior-most partners. CBI needs to examine why the NSE chose to record its appreciation of Chitra Ramkrishna’s contribution and allow her to leave with full encashment of all monetary benefits which added up to an astounding Rs44 crore over three years.
•CBI may also want to ask SEBI about how and why NSE has had 30 broker defaults in the past two years, despite a system of risk-based supervision being put in place. Does this mean that the SEBI mandated risk-based supervision has failed? If yes, what action has SEBI initiated to prevent cumulative losses to investors of over Rs5,000 crore in these broker defaults?
•CBI needs to examine ask why SEBI has failed to use its extensive powers of search, seizure and arrest to conduct a stricter investigation and built in-house capability for it. The strangest part of the algo scam investigation was in SEBI repeatedly asking NSE to investigate itself and submit reports and ignoring the conflict of interest situations.
•Why SEBI was in such a hurry to issue weak orders, starting 30 April 2019 exonerating the top management, when investigations are far from complete. The recent revelations about governance issues, when juxtaposed with the initial orders, shows that the regulator had failed to grasp the absolute power enjoyed by successive MDs of NSE, the ease with which systems and process were bypassed and the complicit silence of its board of directors, overawed by extraordinarily high monopoly profits earned by the Exchange.
•CBI needs to examine SEBI’s orders, where detailed findings on issues are diluted with a single throwaway sentence that there is no evidence of fraud or collusion by top officials – thus giving a clean chit to the top management. Remember, the first of SEBI’s five orders in the algo scam were issued long before all investigations were completed.
•Why SEBI has tacitly allowed the dilution of penalties and action. In May 2021 SEBI did not object when NSE approached the securities appellate tribunal (SAT) and obtained the release of Rs6,085 crore of Colo revenue impounded and credited to an escrow account, as part of the punitive action in the Colo scam.
CBI has been known to be ham-handed and to botch up investigations, often due to political interference. It also tends to launch sweeping investigations that do not separate the guilty from the innocent. But there is no denying that NSE’s kid-glove treatment by SEBI and its attempt to ensure an ‘IPO at any cost’ creates a dire need for an independent investigative agency to cut through incestuous connections between the regulator and the Exchange. The irony is that the trigger for this much-needed action was a nirankari baba who may or may not exist.
(Read our full coverage on the algo scam here and documents/reports relied on in our book Absolute Powerhere)
This article has many salient points e.g. SEBI ignoring "conflict of interest" and repeatedly asking NSE to be the "judge and jury", CBI known to botch-up investigations (political interference). If these are true, what should we expect and "when". The investigations will take ages and fade out from memory UNLESS the Government of the day means business.
The article has given an elaborate list of what CBI needs to address in its investigation. The ball is now in CBI’s court. Will it deliver? If the central government has the time and inclination to clean up NSE, it will. In all likelihood, expect a wishy-washy outcome. Heads, including those in SEBI, will not roll; only knuckles rapped. Investors will lap up the NSE IPO like camels in an oasis. The dust will settle. Until a whistle blower points to another skeleton. Then it will be ‘Here we do again’. Sounds cynical. Nothing will change unless the likes of Chitra Ramkrishna, Anand Subramanian and Ravi Narain are clubbed with Dawood Ibrahim, Hafeez Saeed and Masood Azhar and dealt with in the way the latter are. After all, the harm done by these financial terrorists is several times more than that done by conventional terrorists.
Sucheta Dalal\'s investigative report has once again woken up the government . I hope SEBI to initiate clearing of the mess at NSE , the world\'s biggest derivatives market and restore the faith of the investors.
Sebi is a possibly corrupt body and given more than required Powers and it is using those powers for its own interest only. Sebi's powers need to be curtailed because it has become extremely arrogant and destroying Indian capital markets
The Vedas represent inside knowledge. Perfect metaphor for what's going on here. Let us not assume that the "yogi" is a male. Ms Ramkrishna seems gullible and might have been impressed by another woman from the NSE. Bourses rigged from the top imply that the whole show is like the JimCarrey-starrer Truman show. We are the unwitting scalp.
Very murky story: heady mixture of ego , sex and power which has ruined NSE , the Institution and the country. The mysterious guru has THE FIRST THREE VEDAS REPRESENTING ALL KNOWLEDGE IN HIS EMAIL ADDRESS.
Actually its very funny that in todays world the government can not prove identity of holder of an email id for 7 long years. The way the media is downplaying the issue, there must be very very very powerful, influential and rich people are involved. The whole issue is rotten. Its strange that an entire organization of the stature of NSE kept silence for almost a decade and still nobody from organization is coming out with truth.
Whether or not Anand Subramanian was the Yogi will surely be known to entire top brass in SEBI and finance ministry.. the investigations and findings so far are a complete sham.. shows SEBI in such bad light that it can only be called an impotent regulator..
One wonders why a former FM who is a SME on anything and everything under the sun hasn't joined the issue and hasn't released any statement let alone meeting the press.. one wonders if that Pucca Chor is the Yogi..
Has so caled other Financial Experts apart from PC like Dr Subramanian Swamy & Auditor Gurumurthy addressed this issue or given any statment .What about current FM ?
NSE is not fit for ESG investments. MOF/SEBI are Financial terrorists clandestinely subverting the National Interests for personal gains. But nothing will change as long as criminal FIIs are around.
In government services,it is rarest of rare to get dismissed and get punishment for whatever corrupt practices he is involved.Regulator SEBI,NSE are part of this system.
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that\'s why country never excel in anything.
One wonders why a former FM who is a SME on anything and everything under the sun hasn't joined the issue and hasn't released any statement let alone meeting the press.. one wonders if that Pucca Chor is the Yogi..