The Securities and Exchange Board of India (SEBI) has imposed a penalty of Rs1 lakh each on the promoter-director and system administrator of Kolkata-based Excel Stock Broking Pvt Ltd for violating the provisions about the access to secondary servers of the National Stock Exchange (NSE)’s co-location (Colo) facility.
In an order, Soma Majumder, adjudicating officer (AO) of SEBI
says, “There are no investor complaints on record arising out of failure on the part of the noticees... I also note that the noticee except for the fact that the noticees provided incorrect and contradictory statements for two particular queries of the investigating authority (IA), the material available on record shows that the noticees have extended their cooperation to the IA on the majority of the instances.”
During the investigation, the IA had asked the noticees, Anil Kedia, promoter-director and Nagendra Yadav, system administrator of Excel Stock Broking, if they know the guidelines provided by NSE in relation to connections to be made to the secondary server. On 16 April 2013, the NSE colo support had sent an email to Ravi Sharma on his official and personal ID.
On 3 May 2019, both Mr Kedia and Mr Yadav told the IA that they were unaware of any such email. However, responding to a query from the IA, on 3 September 2019, they both submitted that based on their recollection, they had read the guidelines received from NSE.
“The incorrect and contradictory statements made by the noticees in their statements deposed before the IA is a testimony to the fact that they did not fulfil the obligations cast upon them under section 11C (2) of the SEBI Act.
In view of the foregoing, I find that the allegation that the noticees violated section 11 C(2) of the SEBI Act stands established,” Ms Majumder, the AO of SEBI says in an order issued on 29 July 2021.
Further during the hearing, both Mr Kedia and Mr Yadav contended that SEBI issued notices after a delay of six years.
SEBI elucidates that “it carried out a detailed investigation during 2018 to 2020 involving various brokers including the noticees, when such entities continuously logged in to the secondary server during 2010 to 2015, whereafter it was deemed fit to enquire whether the noticee connected to the secondary server without NSE’s permission, and the show cause notice was issued in October 2020, thus there was no delay.”
In 2015, an anonymous whistleblower had written to Sucheta Dalal. managing editor of Moneylife alleging that some trading members on the NSE, who had subscribed to the Exchange’s co-location server facility were getting an unfair advantage by way of faster access to the Exchange. The whistleblower also alleged the collusion of NSE officials.
It may be recalled that Moneylife
was the first to expose this scam in mid-2015
, for which NSE had filed a defamation case against us. A single-judge in Bombay HC dismissed the frivolous suit and ordered the NSE to pay a fine of Rs50 lakh (mainly to two Mumbai hospitals). After filing an appeal against the order, NSE paid up the penalty. Meanwhile, in the wake of the scam, the top brass of NSE had to resign and a new management team took charge.