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SEBI Slaps Rs5.20 Crore Penalty on OPG Securities and 3 Directors in NSE Co-location Case
Moneylife Digital Team 03 April 2025
Investor Interest
Market regulator Securities and Exchange Board of India (SEBI) has imposed a penalty of Rs5.20 crore on stockbroker OPG Securities Pvt Ltd and its three directors for unfair access to secondary market servers in connection with the  National Stock Exchange (NSE) co-location (Colo) case. Last year in September, SEBI directed OPG Securities, Sanjay Gupta, Sangeeta Gupta and Om Prakash Gupta, the three directors of the brokerage to disgorge Rs85.25 crore with an interest of 12%pa (per annum).
 
In an order, Asha Shetty, adjudicating officer of SEBI, says, "I note that securities appellate tribunal (SAT) has affirmed in its order that OPG Securities (noticee 1) gained an unfair advantage by repeatedly accessing the secondary point of presence (POP) server, thereby making unlawful gain. Regardless of the quantum of such unlawful gain, it is evident that the manner in which OPG Securities connected to the secondary server constituted an unfair practice, which was recurrent in nature. This amounts to a serious violation." 
 
"Furthermore, OPG Securities failed to adhere to the standards of integrity, due skill, care and diligence in the conduct of its business and in ensuring compliance with statutory requirements. Sanjay Gupta (noticee 2), Sangeeta Gupta (noticee 3) and Om Prakash Gupta were directors of OPG Securities, during the relevant period of violations and were responsible for its day to day affairs, hence they are vicariously liable for the acts of omissions and commissions by the brokerage. Additionally, Sanjay Gupta was obligated to ensure that correct information was provided promptly to SEBI, however, he failed to ensure cooperation with SEBI and hampered investigations in the instant proceedings," the AO says.
 
Additionally, SEBI has fined OPG Securities and Sanjay Gupta Rs10 lakh each for violating the regulator's code of conduct and obstructing the investigation.
 
 
The issue dates back to SEBI's adjudication order on 11 February 2021 which confirmed that OPG Securities had unfairly accessed NSE's secondary POP server, leading to unlawful gains. The brokerage was found guilty of non-compliance with regulatory standards, and its directors were held responsible for these violations.
 
In a ruling on 12 July 2023, SAT upheld these violations but directed SEBI to reconsider the penalty quantum. It also set aside an earlier disgorgement order of Rs15.57 crore. Subsequently, in its order dated 13 September 2024, SEBI recalculated the disgorgement amount to Rs85.25 crore, applying a 12%pa interest rate and adjusting for previous payments made by the notices.
 
Despite appeals from OPG Securities and the Guptas to defer the adjudication proceedings due to pending cases before the Supreme Court and SAT, SEBI proceeded with the penalty assessment. The regulator emphasised that the violations had already been confirmed and that unfair market access, irrespective of precise financial gains, undermines investor confidence and market integrity.
 
SEBI has imposed an additional six-month market ban on Sanjay Gupta as part of its enforcement measures, extending his existing five-year debarment. Furthermore, SEBI has ordered the freezing his securities holdings for the duration of the restraint period. 
 
SEBI clarified that the noticee's attempts to challenge the profit computation methodology and reference other similar cases were irrelevant in this context. The regulator maintained that the penalty imposed was proportionate to the severity of the violations and served as a deterrent against unfair market practices.
 
The noticees were given ample opportunity to present their case and SEBI says it found no justification to delay the penalties further. Initially, SEBI had imposed a Rs5.2 crore penalty in February 2021. Following an appeal, SAT remanded the matter to SEBI's adjudicating officer for reconsideration of the penalty quantum in July 2023.
 
The Colo case dates to 2015 when Moneylife first published a letter by a whistle-blower going by the name Ken Fong in June. The whistle-blower alleged that NSE officials were selectively allowing a few brokers to reap massive profits through preferential access to its colo servers in the form of early log-in or access to servers with low trading loads.
 
The NSE Colo scam has been documented by Moneylife editors Sucheta Dalal and Debashis Basu in their book  Absolute Power: Inside Story of the National Stock Exchange's Amazing Success, Leading to Hubris, Regulatory Capture and Algo Scam, released in June 2021. 
 
 
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