The Securities and Exchange Board of India (SEBI) on Tuesday declared the National Stock Exchange (NSE), India’s largest equity bourse, guilty of not exercising due diligence in the co-location scam. The exchange has been asked to pay a fine of ₹625 crore plus 12 per cent (for five years) interest.

The amount, if considered with simple interest, would come to little less than ₹1,000 crore. If it involves a compound interest, the fine could amount to around ₹1,300 crore, experts said.

Additionally, the NSE, as per the order, has been barred from accessing the capital market in terms of public issue and launching new products for six months.

SEBI said the disgorged amount has to be deposited in the Investor Protection and Education Fund within 45 days.

SEBI found former NSE managing directors Ravi Narain and Chitra Ramkrishna guilty in the case and prohibited both from associating with listed company/market infrastructure for three years. Also, Narain has to give away 25 per cent of his salary drawn for the period FY11 to FY13 and Ramkrishna 25 per cent of FY14 salary to the investor protection fund.

Dark-fibre-related matter

In the dark-fibre-related matter, wherein leased lines were given that led to preferential access, the NSE was fined ₹62 crore with 12 per cent interest. SEBI’s whole-time member SK Mohanty passed all the orders.

SEBI held the NSE, its key directors and brokers GKN, Sampark and Way2Wealth guilty of violating the provisions of the Prevention of Fraudulent and Unfair Trade Practices Regulations in the dark fibre case. NSE’s former technology official Umesh Jain and business chief Ravi Varanasi were held not guilty.

A probe into NSE’s co-location arrangement, wherein broker-servers were given rack space close to the exchange’s server, was ordered after it was alleged in 2015 that a few had unfair access to the exchange’s trading facility. This set-up of server gave a 10:1-speed advantage to the traders.

SEBI directed Ajay Shah, who allegedly got key data from the NSE, to not associate or hold any position in exchanges or market infrastructure companies for a period of two years. SEBI also directed Sunita Thomas and Krishna Dagli, associated with Infotech Financial that was said to have got privileged data from the NSE, to not provide any services to market players for two years.

NSE’s former head of regulations Suprabhat Lala, husband of Thomas, too has been restricted from holding any positions in market companies for two years.

The NSE has been directed to take ‘necessary legal actions’ against Shah, Infotech Financial, Thomas and Dagli for violating the provisions of the ‘Professional Service Agreement’ signed in connection with the LIX project and for misusing the data made available to them. The exchange has also been asked to submit an action taken report within three months.

SEBI has passed a separate order against OPG Securities, prohibiting the brokerage and three of its directors from accessing the capital markets for a period of five years. The brokerage has been directed to disgorge ₹15.57 crore with 12 per cent interest.

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