Latest SEBI Order against NSE’s Former Management including Chitra Ramkrishna Reveals Shocking Misgovernance and Improper Equations Suppressed by Board
Moneylife Digital Team 12 February 2022
After a long delay of over six years, the Securities and Exchange Board of India (SEBI) has issued yet another order which finally exposes the most shocking misgovernance at the National Stock Exchange (NSE) in the period when the colocation scam was happening. What is worse, it appears that senior management and the board colluded to suppress information on appointments, responsibilities, evaluation and salaries from the regulator as well. 
The order primarily deals with the actions of Chitra Ramakrishna, who had to resign in the wake of the algorithm (algo) scam and when information about her appointment of group operation officer (GOO) Anand Subramanian became public. The order reveals how Ms Ramakrishna appointed Mr Subramanian as a consultant, reporting directly to her,  on the very day she took charge as managing director (MD). A forensic audit by Ernst & Young, ordered by SEBI later revealed that Ms Ramakrishna has been corresponding with Mr Subramanian even before her appointment and sharing, not only confidential data, but very personal messages with him.
Most of the very personal exchanges have been kept out of the SEBI order, but even the little that is revealed exposes how NSE, now the largest derivatives exchange in the world, was being run and controlled like a private fief by the erstwhile management comprising residual members of the founding management team. 
Anand Subramanian was asked to resign in October 2016 and the drama of his removal has been documented by Moneylife editors Sucheta Dalal and Debashis Basu in their book “Absolute Power: Inside story of the National Stock Exchange’s amazing success, leading to hubris, regulatory capture and algo scam”, released in June 2021. SEBI has been sitting on this information since 2014 and issued its order only now. 
NSE, Chitra Ramakrishna the MD, Ravi Narain, then vice-chairman, J Ravichandran, executive director (ED) in charge of compliance, Anand Subramanian, GOO and VR Narasimhan, the chief regulatory officer.  The last mentioned is significant because even as SEBI was involved in the investigation and issued a show-cause notice (SCN) in December 2019, he was appointed as the dean  ( of the National Institution of Securities Management (NISM) and continues in that role even today. 
When Moneylife asked SEBI about the appointment to an institute set up by the regulator, we were told, “Mr Narasimhan was appointed by NISM when there wasn’t any investigation against him. SEBI doesn’t interfere in the day to day administration of NISM. Mr Narasimhan’s tenure is till April 2022.” SEBI is silent about the fact of his continuance. 
Rise and Rise of Anand Subramanian
The SEBI order tabulates and documents the extraordinary rise of Anand Subramanian, with the connivance of the NSE board, without declaring him a key management person (KMP) even while he was appointed on the boards of NSE’s subsidiary companies and almost every decision of the Exchange, since his appointment as a consultant, was routed through him. He also availed of perks that were not given to any other consultant; he travelled first class around the world, often accompanying Ms Ramakrishna and was allowed to spend two to three days a week in Chennai, where his wife was also employed by the Exchange. 
More importantly, his evaluation did not go through the HR (human relations) process and was decided by Ms Ramakrishna alone. It is a scandal that all this was unknown to the regulator, although NSE is a highly regulated and very sensitive market institution. 
SEBI received three complaints against NSE alleging governance issues in the appointment of Mr Subramanian. The complaints alleged that there was no employment documentation for Mr Subramanian, or his experience in finance could not be verified since no papers were provided to the HR department.
“Direct posting (of Mr Subramanian) as a consultant to MD, unequal pay of more than Rs4 crore per annum is higher than most of the seniors at NSE. After all these powers and privileges, he is still not identified as a key person to SEBI. Current MD, Chitra Ramkrishna, has brought in Subramanian Anand as chief operation officer into NSE. Subramanian Anand has worked in Balmer and Lawrie in middle-level management with zero exposure to capital markets. His cost to the company is not less than Rs5 crore. Ms Chitra is totally dependent on Subramanian Anand and does not do anything without his consultation,” the complaints had alleged. 
After receiving the complaints, SEBI, four times in 2016, asked NSE to clarify if Anand Subramanian had been designated as KMP. Dr Narasimhan, the then CRO, told SEBI that there was no violation of Securities Contracts (Regulations) (Stock Exchanges and Clearing Corporations) Regulations, 2012 (SECC Regulations) in the appointment of Mr Subramanian and the MD, being competent authority, had appointed him. 
Here is a table in the order about his extraordinary rise. 
Relationship between Ms Ramakrishna and Mr Subramanian
A forensic audit by Ernst & Young (E&Y) revealed that Ms Ramakrishna had been sharing internal confidential information about NSE’s organisational structure, dividend scenario, financial results, HR policy and related issues, and response to the regulator with a person believed to be Mr Subramanian between 2014 to 2016, even before he was appointed by her as a consultant. This was being done through pseudonymous emails IDs, where her correspondence was to an email ID [email protected]
The SEBI order, however, underplays this aspect and says, “… I find that Anand Subramanian was also an accomplice with the unknown person, who influenced the decision of Chitra Ramkrishna and thereby benefitting himself by being re-designated as ‘group operating officer and advisor to MD’ and having the compensation being paid to him increase substantially each year, upon the advice of the unknown person to Chitra Ramkrishna. This is evident from the fact that Anand Subramanian was also a recipient to most of the emails between Chitra Ramkrishna and the unknown person.” 
“Further, Anand Subramanian, in his statements dated 12 September 2018, has himself also stated that he knew the unknown person for the past 22 years. In this regard, I note that the unknown person in his email dated 5 September 2015 to Chitra Ramkrishna, stated that ‘SOM, If I had the opportunity to be a person on Earth then Kanchan is the perfect fit. Ashirvadhams. SIRONMANI.’ (‘Kanchan’ here referring to Anand Subramanian). Therefore, I note that the unknown person clearly favoured Anand Subramanian, and Chitra Ramkrishna, who greatly relied on the unknown person, would have acted on the same.” 
“Therefore, from the record of events of the appointment of Anand Subramanian and substantial increase in his emoluments every year and the delegation of powers akin to that of MD & CEO, along with the email exchanges between Chitra Ramkrishna with the unknown person where Anand Subramanian was also a recipient, it is clear that there has been a conspiracy for the appointment and rise of Anand Subramanian in NSE. I find that this was being implemented by Chitra Ramkrishna through the unknown person who greatly favoured Anand Subramanian,” Anant Barua, the whole-time member (WTM) of SEBI says in the order.
The order from the market regulator also reveals how Anand Subramanian influenced the decision making of Chitra Ramkrishna. It says, “SEBI’s examination found that the said unknown person, i.e. Anand Subramanian had significantly influenced the decision making of Chitra Ramkrishna as reflected from the emails exchanged between Chitra Ramkrishna and the unknown person, as perused by SEBI.”
Role of the NSE Board
Chitra Ramkrishna resigned from NSE on 2 December 2016. However, SEBI raised serious questions on how the NSE board allowed her to exit from the Exchange, despite the misconduct in appointing and sharing confidential information with an unknown person. 
“SEBI examination found that in spite of having knowledge of such grave irregularities and misconduct on the part of Chitra Ramkrishna on the appointment of Anand Subramanian in the NRC and NSE board meeting held on 21 October 2016 and knowledge of exchange of confidential information by Chitra Ramkrishna with an unknown person in the NSE Board meeting held on 29 November 2016, NSE and its NRC and board members, in the board meeting held on 2 December 2016, allowed Chitra 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 Anand Subramanian without taking any action in this regard,” the order says.
In the order, SEBI also raised severe questions on the silence of public interest directors of NSE in this matter. 
SEBI examination found that in terms of Clause 12 of SEBI Circular dated 13 December 2012, public interest directors on the NSE board are required to identify essential issues that may have a significant impact on the functioning of the stock exchange and that may not be in the interest of the market and report to SEBI. However, SEBI was not informed about the decisions taken by the board of NSE at its meetings held on 21 October 2016 and 29 November 2016, reflecting the serious governance issues in NSE, the regulator says.
For the first time, the role of J Ravichandran, the most low-profile member of the original founding team, is also examined by the market regulator. Mr Ravichandran was asked to hold charge as CEO after the sudden exit of Chitra Ramkrishna from NSE. 
In its order, SEBI observed, “J Ravichandran has failed to address the issue properly in compliance with the law and his defined role and responsibility by NSE and acted in a manner resulting in suppression of the irregularities on the appointment of Anand Subramanian.”
“As a matter of duty, Dr VR Narasimhan as compliance officer under the SECC Regulations, 2012 was required to report to SEBI independently about non-compliance of SECC Regulations, 2012 with respect of the re-designation of Anand Subramanian as ‘group operating officer and advisor to MD’ which was also not done. In view of the above, it was observed that VR Narasimhan has failed to address the issue properly in line with his defined role and responsibility and made misleading and incorrect statements to SEBI on compliance with the SECC Regulations, 2012 resulting in suppression of the irregularities,” SEBI says. 
Dr Narasimhan, with over 40 years of experience in education and financial markets in India, was division chief for secondary markets at SEBI. At present, he is dean and professor of practice - School for Regulatory Studies and Supervision (SRSS) and School for Corporate Governance (SCG) at National Institute of Securities Markets (NISM), a public trust established by SEBI. 
Penalty Imposed
SEBI has barred Chitra Ramkrishna, former MD and CEO, Ravi Narain, former vice-chairman and Anand Subramanian, former group operating officer (GOO) and advisor to MD and CEO from associating with any market infrastructure institution (MII) or any intermediary registered with SEBI. While imposing a monetary penalty of Rs3 crore on Ms Ramkrishna, the market regulator has asked NSE to forfeit her excess leave encashment of Rs1.54 crore and the deferred bonus of Rs2.83 crore.
The market regulator also restricted NSE from launching any new product for six months. 
The SEBI order says that Ms Ramkrishna and Mr Subramanian have been barred from markets for three years, while Mr Narain would stay away from markets for two years.
Further, SEBI imposed a penalty of Rs3 crore on Ms Ramkrishna, Rs2 crore each on NSE, Mr Narain and Mr Subramanian. Dr VR Narasimhan, the then CRO and compliance officer of NSE, is also penalised with an Rs6 lakh fine. 
Moneylife has been reporting the shenanigans at NSE for the past seven years. As reported by Moneylife, the day Ms Ramkrishna became MD and CEO, Mr Subramanian was appointed as an advisory consultant on the NSE board. From 1 April 2015, he was re-designated as group operating officer and adviser to the MD. In the same note, Ms Ramkrishna re-designated J Ravichandran as group president for F&A, CSR and corporate general counsel and being company secretary of NSE. (Read: Subramanian Anand resigned from NSE)
IMPORTANT Excerpts from the SEBI Order...
SEBI Order
2 years ago
The real story distracted by yogi narrative. The focus should be on the beneficiaries of co location scam . Also why did SEBI took nearly 5 years? Why was the case not referred to CBI earlier? Why no arrests made?
2 years ago
This nightmarish story reads as if it is from some banana republic ruled by a tinpot dictator. Except that it is not! It is India that we are talking about, an aspiring superpower. Such affairs are a disgrace. Full investigation, public disclosures and exemplary punishments are a must, otherwise public trust in governance will dry up.
2 years ago
2 years ago
To secure employment as a peon who get Rs 10000 as salary the recruitment
process is formidable.Here someone who has zero experience in the field is
appointed to a top post without even the basic checks being done ,his emoluments
are enhanced every year with hardly any criteria and the wise men in the board and
a specialist in the field are all silent spectators.Now a cock and bull story is provided
to justify the gross improprieties by all.And the punishment comprises of peanuts.
Not even permanent debarring.
2 years ago
Aisa bhi hota hai? It is beyond belief. If this is situation in Prime Stock Exchange then what must be happening in other Institutions?
2 years ago
Gang of South Indians....!!!! Sucheta you should be repenting fixing Harshad ( the small fish) and unable to do anything to such Sharks which you saw in rest of the life!!!
2 years ago
It is so deplorable that Chitra Ramakrishna and the rest of the gang who colluded with her have got away with such minor punishment. Maybe Moneylife should take the lead with Netflix or some other producer to make a TV serial on the entire sorry episode of NSE (like Scam 1992) so that all the roles of all the guilty people are brought to light. And of course, the entire thing could not have happened without the blessings of a very powerful politician
2 years ago
Penalties by way of fines are not a long term deterrant . Criminal action should be initiated against the concerned persons.
2 years ago
Lot of such appointments are made in India based on kith and kin of CEO, CFO, board members. You can't punish someone for that. Promotion and salary are given based on those consideration. But in this case board has approved those appointment and share holders have not said anything. Nse is fairly successful company despite these actions. I see only couple of minor violations like reporting of additional responsibility and mail with sensitive info sent to outside people (pretty normal in most companies). My main concern is Sebi's delayed action and incompetence, why it waited so long, seems like witch hunt to me. Usually Sebi takes action after company has collapsed like Reliance (Anil Ambani).
2 years ago
A clear case of political appointments MVA maha Vasuli Aghadi
2 years ago
Absolutely bizarre. Absolute Power had nares the unbridled misfeasance. And now come paltry penalties. The so-called independent directors have gotten away unscathed.

The "Shromani" episode shows that the CEO has to have stable mind and emotional intelligence. But for monopolistic positioning, Chitra Ramakrishna nee Sankaran would have destroyed NSE.
Hemant K Chitale
2 years ago
Whaaat was happening at NSE ? Who is the "Siddha Purush / Yogi" dwelling in the Himalayas ? The whole thing seems worse than a dream or nightmare.
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