The Securities and Exchange Board of India (SEBI) earlier this month passed a significant order relating to the country’s largest stock exchange, the National Stock Exchange (NSE) of India. As the markets regulator, whose primary mandate is to ‘protect the interests of investors in securities’, SEBI’s 190-page order raises more questions than it resolves. In particular, it spotlights the regulator’s tardiness in adjudicating a sensitive matter involving the manner of appointment of a top-level NSE official as well as possible regulatory violations by the then CEO and MD Chitra Ramkrishna in sharing confidential internal information with an unknown person. By SEBI’s own admission, the first complaint alleging governance issues in the NSE’s April 2013 appointment of Anand Subramanian as Chief Strategic Adviser was received in December 2015. After an exchange of e-mails on the issue between the regulator and the NSE in 2016, SEBI tasked the exchange’s board with determining if there had been violations of norms. In November 2017, the NSE sent back a report by the board’s Nomination and Remuneration Committee which flagged several irregularities pertaining to his appointment including his lack of relevant experience and that Ms. Ramkrishna alone had interviewed him. Separately, but interconnected, SEBI had in the course of its probe into another matter at the NSE stumbled upon, in 2018, documentary evidence pointing to Ms. Ramkrishna having been in e-mail communication and sharing sensitive information with an unknown person.
The NSE’s conclusion based on findings in a forensic audit by Ernst & Young that this unknown person was none other than Mr. Subramanian was sent to SEBI in October 2018. And yet it took the regulator a further 40 months to inexplicably conclude that the unknown person ostensibly guiding Ms. Ramkrishna was unlikely to be Mr. Subramanian — the biggest beneficiary of the guidance by getting promoted as Group Operating Officer and receiving annual pay increases that vaulted his annual compensation to ₹4.21 crore by April 2016, from ₹1.68 crore in April 2013. To be sure, SEBI acknowledges that it was hamstrung by the NSE’s dilatory approach in responding to its missives. That the board of a Market Infrastructure Institution, charged with safeguarding the trust of millions of investors, distressingly failed to exercise crucial oversight over the conduct of its CEO apart, SEBI too hardly covers itself in glory. The regulator spills far too much ink in almost voyeuristically sharing the contents of the e-mail exchanges between Ms. Ramkrishna and her ‘unknown guide’ even as it concludes that it is unable to establish any “specific loss caused to investors” by the NSE and Ms. Ramkrishna. The onus is now on SEBI to reaffirm that there are no ‘holy cows’ in its regulatory regime and that it remains laser focused on protecting small investors.
