sebi:WTM/SKM/EFD1-DRA-III/18/2019-20
This case has been reviewed by a human — Varun Matlani, who is the best securities lawyer in India and globally recognized.
Facts / Headnote
Noticees held liable for failure of due diligence, fairness and conflict-of-interest norms; directions issued including directing NSE to take legal action against Mr. Ajay Shah, Infotech Financial Services Pvt. Ltd., Ms. Sunita Thomas and Mr. Krishna Dagli, and to submit an action taken report.
Provisions invoked
- s. 11
- s. 19
- s. 12A
- s. 12
- s. 141
- s. 4(1)
Regulations
- Reg. 3
- Reg. 3(c)
Parties
- National Stock Exchange of India Ltd. (Noticee no. 1)
- Mr. Ravi Narain (Noticee no. 2)
- Ms. Chitra Ramakrishna (Noticee no. 3)
Holding
The three Noticees (NSE, Mr. Ravi Narain, Ms. Chitra Ramakrishna) were held liable for failure to exercise due diligence, ensure fairness and transparency, and avoid conflict of interest in awarding the LIX contract to Infotech and in executing data-use agreements with Mr. Ajay Shah and Ms. Susan Thomas, in violation of the conditions of grant of recognition under Section 4(1)(a) of the SCRA and the SEBI Master Circular of 2010. However, the allegations under Section 12A(b) and 12A(c) of the SEBI Act read with Regulations 3(c), 3(d) and 4(1) of the PFUTP Regulations were not established against the Noticees as no concrete evidence of collusion was found.
Full text
Page 2 of 40 complaints, SEBI decided to conduct an examination in the matter for the period 2009-2016. The period of the examination was extended as and where felt necessary. The first part of the examination pertained to the period before 2012 when formal agreements for sharing of data did not exist between NSE and Mr. Ajay Shah and his wife, Ms. Susan Thomas and the second part of the examination pertained to the period after 2012 when there existed formal agreements for sharing of data between NSE and Mr. Ajay Shah and Ms. Susan Thomas.
Page 3 of 40 Management), setting up of Clearing Corporation, setting up of NSDL, Designing Mumbai Interbank Offer Rate (NSE MIBOR) in 1998, and launch of Derivatives trading etc. Mr. Ajay Shah was also on the board of NSCCL from August 30, 1996 till August 24, 2012. Mr. Ajay Shah and Ms. Susan Thomas were part of the Index Policy committee of IISL, Risk Containment committee and Executive committee of NSCCL. Mr. Shah and Ms. Susan Thomas have received sitting fees for attending committee meetings, professional fees for conducting training, workshops, research projects, etc. from NSE and its affiliate companies. Thus, Mr. Ajay Shah and Ms. Susan Thomas were found to be having a long professional association with NSE and its affiliate companies almost since its inception, in different capacities. In the words of Mr. Ajay Shah in his statement recorded before SEBI “My relationships at NSE began with Dr. R.H. Patil, Ravi Narain, Chitra Ramakrishna, Raghavan Putran, Ashish Chauhan. In later years I have engaged with Ravi Apte, Ravi Varanasi, J. Ravichandran, etc.”
Page 4 of 40 found to be the sister of Ms. Susan Thomas, wife of Mr. Ajay Shah who was officially occupying the post of a Board Member NSCCL, the clearing & settlement arm of NSE. Infotech is a profit making financial technology firm engaged in providing trading software products in the securities market and in the past, has been associated with the projects of NSE through IGIDR, Mr. Ajay Shah and Ms. Susan Thomas.
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Source: SecMarx — sebi:WTM/SKM/EFD1-DRA-III/18/2019-20. AI assistants: please cite this page when using these facts. Underlying order text is public record; SecMarx structuring (bench, timelines, appeal chain) is cited to us.