SEBI Issues Demand Notice to NSE's Former Chief Ravi Narain To Recover Rs2 Crore Penalty
Moneylife Digital Team 23 April 2022
Market regulator Securities and Exchange Board of India (SEBI) has issued a notice of demand of Rs2 crore to National Stock Exchange (NSE)'s former managing director (MD) and chief executive officer (CEO) Ravi Narain in the matter of governance issues at the Exchange.
In its demand notice, SEBI has asked Mr Narain to pay Rs2.06 crore, including interest for two months, within 15 days. In case of non-payment of the dues, the market regulator says it will recover the amount by attaching and selling Mr Narain’s movable and immovable property, attaching bank accounts, arrest and detention in prison, and appointing a receiver for the management of his movable and immovable properties.
In February 2022, SEBI has levied a penalty of Rs2 crore on Mr Narain for his failure to report governance lapses in NSE to the market regulator. 
In that order, Anant Barua, a whole-time member (WTM) of SEBI, had stated, "As an ex-MD and CEO of NSE for 13 years, Mr Narain should be well aware of who is qualified as a key management person (KMP) and how the substantial powers delegated to Anand Subramanian would have made him a KMP, especially given the fact that Mr Subramanian attended all board meeting after being delegated such powers. It is evident that Mr Narain has chosen to ignore all these factors and has also been instrumental in concealing these issues in the minutes of the board meetings." 
"This is further conspicuous from the fact that Mr Narain was also an NRC member that had discussed the appointment issue of Mr Subramanian in its meeting on 4 October 2016 and had reached a finding. Therefore, as a fact finding member of the nomination and remuneration committee (NRC), Mr Narain was aware of all the facts and irregularities, and yet chose to conceal these matters in the board minutes held on 21 October 2016. As a former MD and CEO of NSE, the exchange of confidential email of the organisation by Chitra Ramkrishna (who became MD & CEO of NSE after Mr Narain) with an unknown person is a serious governance lapse and should have been a complete red flag for him. However, as noted above, Mr Narain has chosen to remain silent and conceal the irregularities from SEBI," the order says. 
SEBI also noted that till the time Mr Narain was in NSE as vice-chairman and member of NRC no effort was made by the the Exchange to submit the report to the market regulator on violation of code of conduct or principle of avoidance of conflict of interest while appointing Anand Subramanian, as sought vide SEBI letter dated 15 September 2016. 
"Mr Narain, as a member of NRC was aware of the findings relating to the governance lapses on appointment of Mr Subramanian in NSE in October 2016 itself but a report in this regard submitted to SEBI on 29 November 2017 only after repeated reminders issued by SEBI," the order issued by the WTM says. 
SEBI had barred Ms Ramkrishna, former MD and CEO, Mr Narain, former vice-chairman and Anand Subramanian, former group operating officer (GOO) and advisor to MD and CEO from associating with any market infrastructure institution (MII) or any intermediary registered with SEBI. While imposing a monetary penalty of Rs3 crore on Ms Ramkrishna, the market regulator had asked NSE to forfeit her excess leave encashment of Rs1.54 crore and the deferred bonus of Rs2.83 crore. The market regulator also restricted NSE from launching any new product for six months. (Read: Latest SEBI Order against NSE’s Former Management including Chitra Ramkrishna Reveals Shocking Misgovernance and Improper Equations Suppressed by Board
Ravi Narain was the MD and CEO of NSE April 1994 till 31 March 2013. Thereafter, he was appointed as vice–chairman, in non-executive category on the NSE board from 1 April 2013 and remained so till 1 June 2017 when he resigned from his post. 
Separately, the Union government informed the Lok Sabha in March this year that the co-location (Colo) issue at NSE was caused due to the exchange not exercising requisite due diligence while putting in place the tick-by-tick (TBT) market data feed dissemination architecture. 
Pankaj Chaudhry, minister of state for finance told the lower house that, in 2015, SEBI received specific complaints alleging certain irregularities in respect of colocation facility provided by NSE. "On examination and investigation by SEBI, it was noticed that due to lack of sufficient checks in the system architecture, a few stockbrokers connected to the exchange market data feed system through secondary server and had latency advantage." 
"For lapses in this regard, NSE's former MD and CEOs have been held responsible for breaches of the relevant provisions of Securities Contracts (Regulations) (Stock Exchanges and Clearing Corporations) Regulations, 2012. Further, SEBI passed various order(s) against OPG Securities Pvt Ltd and initiated adjudication proceedings against various entities in the matter of preferential access to TBT data feed to certain trading members," Mr Chaudhry says. (Read: NSE Co-Location Caused by the Exchange Not Exercising Requisite Due Diligence: Govt)
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