Each year in the Union Budget, the Finance Minister comes up with innovative ideas to boost tax revenues from the stock market by a few thousand crores. But the government seems to be wearing blinders when market regulator SEBI’s negligence is causing a loss of more than ₹2,000 crore to the exchequer. Recently, SEBI imposed a ₹6-crore penalty on the National Stock Exchange (NSE) for investing in six companies without its permission. It was a violation of SEBI norms, the regulator reasoned. Yet, it has allowed the NSE to keep the huge profits it generated through those investments.

The exchange invested in Computer Age Management Systems (CAMS), Power Exchange India (PXIL), NSEIT, NSDL E-Governance Infrastructure (NEIL), Market Simplified India (MSIL) and Receivables Exchange of India (RXIL) without SEBI’s permission. The SEBI order said, “The NSE, being the leading stock exchange, should have set higher standards of compliance... The violation is repetitive in nature and has continued for a long time.”

But there is talk in legal circles that SEBI has conveniently ignored passing a ‘disgorgement of unlawful profit’ order against the NSE. If SEBI believes that profits were made by an entity through violation of norms and even imposes a fine for the same, then how has it allowed the entity to keep the profits? Will this not set a precedent?

In the recently concluded IPO of CAMS, the NSE offloaded its 37.5 per cent stake in the offer-for-sale and had earlier sold a 7.5 per cent stake to Warburg Pincus. It had bought 45 per cent stake in CAMS in 2013 paying less than ₹200 per share. But the stake sale this year netted the NSE more than ₹2,100 crore as 18.28 million shares were sold at ₹1,230. As per recent amendment to the SEBI Act, major portion of fines collected by SEBI has to go to the government coffers. Did SEBI miss a bet in not asking NSE to disgorge profits, in turn, leading to some losses for the exchequer?

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