The 190-pages long order that the Securities and Exchange Board of India (SEBI) issued against Chitra Ramkrishna, the former MD & CEO of the National Stock Exchange, has been much in the news especially with reference to an “unknown person” with whom the former honcho of NSE is alleged to have shared confidential information about the exchange.
While there have been many reports harping on the alleged relationship between Chitra and the so-called “yogi/Siddha Purusha/Paramahansa” with most having a salacious undertone, the bigger question to be asked is the role of the capital markets regulator and whether the watchdog was thorough in its probe and did not leave any loose ends.
It is elementary to say that a probe needs to go beyond the obvious or the statements given by the accused and find the root cause or the ultimate beneficiary if a wrongdoing has been established.
While the SEBI order clearly states that the wrongdoings have been established – hence the penalty and restraining directions – it has also raised more questions as to whether the regulator did all that it could to flesh out the details and take a stricter stance.
To begin with, SEBI has mentioned the email ID and also the email correspondence between Chitra and the unknown person but it doesn’t look like SEBI itself was interested in probing the identity of the unknown person. This, at a time, when the term "unknown person" was mentioned nearly 240 times in the order.
Sharing confidential information is a serious violation by any market intermediary and the regulator has a track record of taking strict action against the wrongdoers. But, in this specific matter, the watchdog seems to have gone with Chitra’s submission that the so-called “spiritual force” who has been guiding her for two decades does not require “any… physical co-ordinates and would manifest at will.”
Assuming the capital market regulator does not have the resources to unearth the identity of the unknown person, the least it could have done is to have filed a complaint with the Cyber Cell of Mumbai Police. The SEBI order clearly shows that it has details of email interactions between Chitra and the unknown person.
“The facts are stranger than fiction, is true to this order. Doesn’t it require SEBI to make a reference to CBI, ED, SFIO or even involve cyber cell to get to the truth?” said a person familiar with the development. He wished not to be named due to the sensitivity of the matter.
More importantly, the regulator has not pressed charges under the SEBI (Prohibition of Fraudulent and Unfair Trades Practices relating to Securities Market) Regulations, 2003, which would have allowed the watchdog to bar the accused entities for as much as seven years and also order disgorgement of illicit gains, if any.
In SEBI’s favour, one could say that NSE is not a listed entity and, hence it would be difficult to establish, in a court of law, the quantum of illicit gains or unfair trade practices. But it is well established in securities law that sharing confidential or insider information is a clear offence and one that the regulator does not take lightly.
A fact that has surprised many in the markets is that while SEBI seems to have gone out of its way to include some unnecessary details in the order – especially the granular details related to submissions of Chitra with respect to her interactions with the unknown person – it has never tried to establish a money trail or check bank accounts or ascertain any personal quantifiable benefits derived by Chitra or any other NSE officials named in the order.
“Interestingly, this is not the first time that SEBI has turned a blind eye to investigate Yogis/Babas or even political masters. In Fortis and Religare matters, Malvinder Mohan Singh had filed handwritten directions to SEBI and even filed an FIR and an affidavit in the Delhi High Court, but there is not a whiff in the orders of SEBI about the same,” said the person quoted above.