CBI Arrests Former NSE GOO Anand Subramanian in Co-location Case

Synopsis: Anand Subramanian, the former Group Operating Officer of the National Stock Exchange, has been arrested by the Central Bureau of Investigation (CBI) in Chennai within a few days of interrogation, sources have informed. This arrest was initiated in Subramanian’s participation in a co-location scandal.

The Press Trust of India, while citing official sources, has revealed that Subramanian has been brought to Delhi and presented in a special court. He was thereafter sent to CBI custody till March 6 by the court.

Authorities informed PTI that Subramanian was very equivocal to the questions put forth by the investigators, and this induced the CBI to arrest him. The arrest was initiated in the case connected with the co-location scandal, the FIR for which was made in May 2018, in the midst of new disclosures regarding abnormalities at India’s biggest stock exchange.

Chitra Ramkrishna, former managing director and CEO of NSE, and Ravi Narain (also the former CEO of NSE) were likewise interrogated by the CBI. 

A report of the Securities and Exchange Board of India (SEBI), conveyed that Ramkrishna was the key decision-maker at the NSE from the period of 2013 to 2016 on the guidance of a mysterious “Himalayan Yogi“, with whom she had never met and who told her to choose Subramanian as the Group Operating Official.

A stipend of Rs 1.68 crore a year was offered to Subramanian to join the NSE as a chief strategic advisor on April 1, 2013, when he was VP at Leasing and Repair Services of Transafe Services Limited, which is a subsidiary of Balmer Lawrie and Co. His compensation was much lesser than Rs 15 lakh per annum in the organization.

SEBI in its report recently, said that the appropriate procedures were not followed in Subramanian’s appointment. Subramanian’s yearly salary saw a great leap to Rs 4.2 crore per year, in under three years for filling in as an advisor for four days in a week. Subramanian was later assigned the position of Managing Director from being a Group Operating Official and consultant from April 1, 2015, yet was never announced as key management staff by NSE.

SEBI had penalized the NSE, Ramkrishna, and Narain for administration lapses in recruiting Subramanian. Ramkrishna has been imposed with a penalty of Rs 3 crore. Also, Narain, Subramanian, and the NSE have imposed been with a penalty of Rs 2 crore each. The former chief regulatory officer and compliance officer V. R. Narasimhan was also fined an amount of Rs. 6 Lakh.

Ramkrishna and Subramanian were barred from connecting with any market infrastructure organization or SEBI-registered entity in any way for the period of three years. For Narain, a two-year bar was imposed.

The CBI’s four-year-old FIR was mainly against Sanjay Gupta, Managing Director of OPG Securities. The FIR additionally mentioned his brother-in-law Aman Kokrady and Ajay Shah, a data specialist and researcher working for NSE, as well as other unknown officials of the NSE and SEBI for their role in the case.

Between the span of June 2010 and March 2014, the NSE had adopted the alleged tick-by-tick (TBT) architecture at its colo office. TBT disseminated data feed successively, providing preference to trading members (TM) that had connected first to the colo server.

Exploiting the mechanism, OPG Securities occasionally acquired first access to the trading system through assistance from specific NSE staff members. All this was uncovered by an informant, Ken Fong, who sent three grievance letters to SEBI in January, August, and October 2015, following which the regulator began several scrutinies and investigations in the matter.

In April 2019, SEBI told NSE to disgorge Rs 625 crore, alongside an interest of 12% annum starting around 2014, for lapses at its colo facility, which permitted unfair access to certain brokers. SEBI also told Narain and Ramkrishna, who were in charge when the trade servers were exploited, to disgorge a fourth of their stipend for a particular period of time.

SEBI told OPG Securities, Gupta, and three others to disgorge Rs 15.6 crore, with a premium of 12% per annum since April 2014. Every one of them has turned to the Securities Appellate Tribunal opposing the order, where the matter is presently being heard.