Sebi sends supplementary notice to NSE over appointment irregularities

The Securities and Exchange Board of India had sent a supplementary notice to India's largest stock exchange by traded volume in December relating to appointment irregularities and code of conduct violations related to its chief strategy officer.

This supplementary notice was sent on December 16, and follows a show-cause notice sent on October 9, 2019.  The details which also talk of actions by the former managing director (MD) and chief executive officer (CEO) are mentioned in the draft offer documents of Computer Age Management Services (CAMS) which is looking to sell shares through an initial public offer (IPO).

“NSE is in receipt of Sebi show cause notice dated October 9, 2019 and a Supplementary notice dated December 16, 2019… in relation to certain alleged irregularities in the appointment of Chief Strategic Advisor and his re-designation as ‘Group Operating Officer and Advisor to MD’ by the former MD and CEO and the sharing of certain internal information pertaining to NSE with an alleged third party by former MD &CEO,” it said.

It added that the exchange had sought inspection of records related to the matter from Sebi and also filed a settlement application in the matter. It added that it was awaiting a response from the regulator. The NSE holds a 37.5 per cent stake in it through its subsidiary NSE Investments Limited (NSEIL). The matter is listed as part of disclosures of litigation involving group companies.

It also mentioned five other matters related to the NSE. One was in relation to preferential access to its co-location facility, another was related to connectivity offered to trading members through an unauthorized service provider. There are also matters related to allegations of governance issues associated with arrangements on research and data sharing, failure to take regulatory approval for unlimited leave encashment by former top executives as well as lack of regulatory approval for reorganization of the NSE group. The matters are all either pending or awaiting orders from Sebi.

The offer, as part of which these disclosures are made, seeks to provide an exit to shareholders.

 “Our Company will not receive any proceeds from the Offer and all such proceeds will go to the Selling Shareholders. Further, our Company expects that listing of the Equity Shares will enhance our visibility and brand image and provide liquidity to our Shareholders and will also provide a public market for the Equity Shares in India,” it said.

Out of the 1.2 crore shares on offer, NSEIL accounts for around half in the share sale. Other shareholders participating in the offer include Warburg Pincus affiliate Great Terrain Investment, Acsys Investments, Housing Development Finance Corporation and HDB Employees Welfare Trust.

The National Stock Exchange is also reportedly looking to come out with an initial public offer. An email sent to NSE did not immediately receive a reply.