The Securities Appellate Tribunal (SAT) has set aside a Securities and Exchange Board of India (Sebi) order of February 2021, imposing a penalty of Rs1 crore on the National Stock Exchange (NSE) and Rs25 lakh each on former NSE chiefs Ravi Narain and Chitra Ramkrishna in the alleged co-location scam.
A whole-time Sebi member had also passed a similar order in the NSE matter in 2019 after Ramkrishna and Narain were found to be in violation of securities laws, and imposed a fine and disgorgement order against the accused.
Ramkrishna and Narain, along with others, appealed the 2021 Sebi order in SAT, which on 23 January set aside the disgorgement action, besides reducing the fine.
On Monday, SAT decided to set aside the 10 February 2021 order since the case is identical to the earlier matter addressed in its 23 January ruling. “We find no further directions are required and the imposition of penalty in the circumstances is unwarranted. The impugned order so far as it relates to the appellants Narain and Ramkrishna is set aside. Appeals are allowed,” said the bench led by justices Tarun Agarwala and Meera Swarup. SAT also clarified that the Rs100 crore penalty on the NSE was more than sufficient.
The matter is related to the co-location scandal, wherein some brokers gained an unfair advantage by securing faster access to the systems, data and trading facilities of NSE at the cost of the broader market. The case came to light in 2015, with Sebi receiving complaints that OPG Securities, a trading member had exploited its relationship with NSE’s personnel to its own benefit. According to the complaints, OPG managed to get preferential access to NSE’s backup servers. It was also alleged that by not taking preventive measures, Narain and Ramkrishna facilitated the fraud by OPG. Sebi found that it knew about the weakness of the system architecture, and designed a software that would allow OPG to connect first and take advantage.
In its recent order, SAT affirmed the violation committed by OPG and its directors but “set aside the order in so far as it relates to the quantum of penalty and remit the matter to the AO to decide the quantum of penalty afresh.”
Pavan Burugula in New Delhi contributed to this story.
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Updated: 17 Jul 2023, 11:47 PM IST