SEBI Slaps Rs5.35 Crore Recovery Notice on OPG Securities, Directors in NSE Colo Scam
Moneylife Digital Team 10 June 2025
Market regulator Securities and Exchange Board of India (SEBI) has issued demand notices to stockbroker OPG Securities Pvt Ltd and its three directors to recover Rs5.35 crore in penalties related to unfair access to secondary market servers in connection with the National Stock Exchange (NSE) co-location (Colo) case. The regulator has warned of attachment of assets and bank accounts if the dues are not cleared within 15 days.
 
The recovery notices, dated 9 June 2025, are issued after OPG Securities and its directors, Sanjay Gupta, Sangeeta Gupta and Om Prakash Gupta, failed to pay the penalty imposed by SEBI in April 2025. The total demand includes the penalty amount and applicable interest.
 
According to SEBI, OPG Securities and Sanjay Gupta have been directed to pay Rs10.30 lakh each. Additionally, the brokerage and all three directors are jointly liable to pay Rs5.15 crore.
 
The recovery stems from SEBI’s findings that OPG Securities gained unfair access to NSE’s secondary servers, violating fair market norms and compromising the integrity of the trading ecosystem. The matter relates to the controversial colo facility offered by the NSE, which allowed brokers to place their servers in close physical proximity to the exchange's systems, a setup that, when misused, enabled faster trade execution and undue advantage.
 
In its April penalty order, SEBI’s adjudicating officer (AO) Asha Shetty found that OPG Securities repeatedly accessed the secondary point of presence (PoP) servers to gain a latency advantage over other market participants.
 
"I note that securities appellate tribunal (SAT) has affirmed in its order that OPG Securities gained an unfair advantage by repeatedly accessing the secondary PoP server, thereby making unlawful gain," the order stated. "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."
 
SEBI further says that OPG Securities failed to maintain standards of integrity, due diligence, and compliance with statutory obligations. The three directors are held vicariously liable for the violations as they were in charge of the brokerage’s daily operations during the relevant period.
 
Additionally, Sanjay Gupta was singled out for failing to cooperate with SEBI investigations. “He was obligated to ensure that correct information was provided promptly to SEBI. However, he failed to do so and hampered investigations,” the SEBI order said.
 
This is not the first time that SEBI has penalised OPG Securities and its directors in connection with the colo case. In September 2024, the regulator ordered them to disgorge Rs85.25 crore, along with 12% annual interest, for unlawful gains arising from the misuse of co-location facilities.
 
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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