This article looks at the various aspects of the latest NSE Scam that recently rocked the media. Not only are the murky and salacious details about the scam a damning indictment on the abysmal state of corporate governance in one of the most regulated financial institutions of our country, it is also a sad reflection of how the rich and the powerful go about trying to shield the guilty through their acts of omission and commission. The scam throws up a myriad of issues, all of which pose some extremely uncomfortable questions that must be answered to avoid the repeat of such a national embarrassment.
This article looks at the various aspects of the latest NSE Scam that recently rocked the media. Not only are the murky and salacious details about the scam a damning indictment on the abysmal state of corporate governance in one of the most regulated financial institutions of our country, it is also a sad reflection of how the rich and the powerful go about trying to shield the guilty through their acts of omission and commission. The scam throws up a myriad of issues, all of which pose some extremely uncomfortable questions that must be answered to avoid the repeat of such a national embarrassment. Chitra Ramakrishna was the rock star MD and CEO of the National Stock Exchange of India (NSE), the leading stock exchange of India and the biggest derivatives exchange in the world. She built the NSE from scratch and was one of the most revered and respected professionals in the world of finance. It was under her stewardship that the NSE had grown to a total market capitalization of US $3.4 trillion (more than the GDP of India) with its flagship index – the NIFTY 50 looked upon as the barometer of the Indian capital market for both domestic and global investors. But things changed dramatically. There were complaints and inquiries leading to her sudden resignation in December 2016. However, it was made to appear as if Chitra had resigned due to personal reasons. Six years later, SEBI (Securities Exchange Board of India – the regulatory body for securities and commodity market in India under the ownership of Ministry of Finance, Government of India) released its final order against Chitra probing allegations of corporate misconduct at NSE. The order is shocking beyond belief. It is full of salacious details that are so embarrassing that it makes a laughing stock of corporate India and exposes the abysmal levels to which corporate governance and integrity have taken a hit in the very institution that showcased our financial and technical prowess to the world. At the time of writing, the anticipatory bail plea of the former NSE-CEO has been rejected by a Special CBI Court of Delhi. Special judge Sanjeev Aggarwal criticized both the CBI for the slow pace of investigation into the co-location scam at the NSE and SEBI for letting off Chitra without any major rebuke. So what exactly is this NSE scam and who is this Himalayan Yogi? Why has the scam put corporate governance and corruption at high places back in the spotlight? The answers show that sometimes facts can be stranger than fiction.
The Co-location Scam The roots of the present NSE-Himalayan Yogi scam go back to 2015. Based on an alleged complaint made to SEBI by an official at a Singapore based hedge fund, investigative journalist, Sucheta Dalal wrote an article on her portal ‘Moneylife’ alleging, “some NSE staffers were leaking sensitive data related to high-frequency trading or co-location to a select set of market participants so that they could trade faster than their competitors”. The NSE didn’t respond to Dalal’s questions. However, NSE slapped a Rs 100 crore defamation suit against ‘Moneylife’ but lost the case in the Bombay High Court. Meanwhile some new NSE Board members began asserting themselves and started questioning the top management about the allegations related to SEBI’s findings related to ‘co-location’. The Board questioned the appointment of Anand Subramanian as Group Operating Officer by Chitra, which allegedly bypassed existing HR procedures at NSE. Soon enough both Anand and Chitra resigned in quick succession. The allegations against NSE were found to be true in what became known as the “Co-location Scam”. In May 2019, the SEBI indicted the country’s leading bourse by saying: “NSE has committed a fraudulent and unfair trade practice as contemplated under the SEBI (PFUTP) Regulations. It is established beyond doubt that NSE has not exercised the requisite due diligence while putting in place the TBT architecture”. The SEBI fined NSE including its former managing directors and CEOs Ravi Narain and Chitra Ramakrishna debarring them from the markets and prohibiting them from holding any position in a listed company for five years. But this was just the beginning of the story.
The NSE-Himalayan Yogi Scam SEBI’s final order against NSE’s former MD and CEO Ms Chitra Ramakrishna whilst probing certain complaints made in 2015-16 alleging governance issues in the appointment of Anand Subramanian as Group Operating Officer (GOO) and Advisor to Chitra created a media storm. The SEBI order brought embarrassing and shocking details about how the most celebrated and charismatic chief of India’s biggest stock exchange was a mere pawn in the hands of a Himalayan Yogi who controlled all her important strategic and operational decisions. The 190-page order of SEBI against Chitra states that she took orders by email from a “siddha purusha”. On the explicit instructions of this faceless entity, she appointed the husband of her good friend Mrs Sunitha Anand as her advisor with an exorbitant salary and plentiful perks. It has now come to light after the CBI took over the investigation into the NSE scam that this GOO – Mr Anand Subramanian was actually the ‘parahamsa/yogi’ who was running the affairs of NSE via email through CEO Chitra Ramakrishna. How bizarre and preposterous? Ernst and Young, the international auditing firm was tasked by SEBI to carry out a forensic audit about the allegations of HR related malpractices at NSE. The latest SEBI order shows the ‘egregious hubris and arrogance’ of its MD and CEO when she is asked to reveal the identity of that unknown person having an email id of [email protected], who is her mentor and spiritual guru. Chitra replies to the queries of the auditors, saying:” The Siddha Purusha/Yogi is a Paramahansa who maybe largely dwelling in the Himalayan Ranges. I have met him on occasions in holy places. No locational co-ordinates are given. To the best of my knowledge, their spiritual powers do not require them to have any such physical co-ordinates”. The CBI has arrested Anand and expanded the scope of its investigations by checking as stated by our Finance Minister if “SEBI took adequate action in the NSE matter”.
Issues the scam raises The first issue that the scam raises is the appalling state of corporate governance in the NSE. If a CEO can implant an advisor and Group Operating Officer on the advice of an unseen siddha purusha communicating via email with an enormous salary and the other members of the NEC Board including the Chief Regulatory Officer can do nothing about it, then the whole system of checks and balances seems either redundant or dysfunctional. Moreover, the NSE handed its CEO an honorable exit by allowing her to resign due to personal reasons saying “linking her resignation to any other issues would be inappropriate”. Next issue pertains to SEBI. The SEBI is the regulatory body designed to check for any malfeasance in the commodities and securities market. Why it took them six years to come out with an order against Chitra is perplexing to say the least. Despite stating in their order that “the sharing of financial and business plans of NSE (with an unknown entity) is a glaring, if not unimaginable, act that could shake the very foundations of the stock exchange”, SEBI shied from calling ‘a spade a spade’ and handed over paltry monetary fines to the accused. The third issue is that the entire sordid saga of NSE has punctured the tall claims of our political leaders that corruption in high places will be a thing of the past when they come to power. But most worrying of all is the complete lack of public outrage over the whole scandal. People are happy to digest the salacious details of the scam and enjoy watching it play out in the media. No calls for heads to roll and no resignations required. As Plato said: “The worst form of injustice is pretended justice.”