Need more probe into NSE 'puppet master': Corporate governance experts

Experts say if indeed 'everyone was asleep at the wheel', finance ministry needs to act 'expeditiously'

Corporate governance experts have called for further investigation into the matter involving former National Stock Exchange (NSE) managing director (MD) and chief executive officer (CEO) Chitra Ramkrishna for sharing confidential information about the exchange with her faceless spiritual guru who has been referred to as ‘unknown man’ and ‘Himalayan yogi’ in the 190-page order issued on Friday.

In the order, the Securities and Exchange Board of India (Sebi) has found irregularities in the appointment of Anand Subramanian as group operating officer of NSE.

“There seems to be something more than meets the eye. This could require further investigation by other agencies, and the finance ministry needs to act expeditiously. The investigations seem incomplete with regard to the connection of this with the colocation scam at the NSE,” says Shriram Subramanian, founder and managing director, InGovern.

An order issued by the markets regulator on Friday revealed Ramkrishna sought advice on crucial decisions from a spiritual guru in the Himalayas.

The order also talks about the former NSE boss sharing the exchange’s confidential information, such as organisational structure, financial results, and human resources policy with this unnamed person who went by the email address rigyajursama@outlook.com.

“The sharing of financial and business plans of the NSE with an unknown person by the MD and CEO is a glaring, if not unimaginable, act that could shake the very foundations of the stock exchange. If such confidential and sensitive information of the NSE could be blatantly, if not shamelessly, shared over official emails by noticee no. 1 (Ramkrishna), one can only fathom how much more confidential information has been shared over private emails, phone or word of mouth,” reads the Sebi order.

Sebi has penalised the NSE, Ramkrishna, and her predecessor Ravi Narain for governance lapses in hiring of Subramanian.

Ramkrishna has been directed to pay Rs 2 crore, while NSE, Narain, and Subramanian have to pay Rs 2 crore each within 45 days.

Further, the NSE has been barred from launching any new product for six months.

Ramkrishna had tendered her resignation to the NSE board at a meeting held on December 2, 2016, even as the colocation scandal involving certain brokers getting unfair access to the exchange’s trading system kicked up a furore.  

Sebi in its order expressed disappointment with the NSE board for not taking action against Ramkrishna.

“…board members allowed Ramkrishna to exit through resignation, despite having committed such bizarre misconduct as reflected from her email correspondence with a fictitious email address apparently belonging to Subramanian, without taking any action in this regard. Moreover, the NSE and its board also appreciated Ramkrishna on record, while accepting her resignation with immediate effect,” says the Sebi order.

Experts have blamed the Sebi board for allowing severe governance lapses.

“This is what happens when absolute power is given to someone. There are enough checks and balances, such as the board and various sub-committees. But often board meetings are rushed through. Very few board members have the time to go through everything thoroughly,” says J N Gupta, MD, Stakeholders Empowerment Services.

A board member associated with the NSE back then said all information pertaining to Ramkrishna was shared with Sebi and she was allowed to exit gracefully to make sure the episode didn’t destabilise the exchange.

“The Sebi order highlights the utter misgovernance of the NSE in the past. The exchange is quite successful financially, but financial success seems to have led to hubris and governance was given short shrift, and taken for granted.  It seems that everyone - the board, the shareholders, the executive team members - at the NSE was asleep at the wheel and there were external influences driving many of the decisions,” said Subramanian.