Chitra Ramkrishna SEBI Order: If Only A Yogi Ran The NSE...

If only a yogi ran India's largest stock exchange, the world's largest in derivative trades.

At least then we could excuse the corruption, opacity, and mismanagement at the National Stock Exchange as collateral outcomes in the pursuit of some higher spiritual goal.

Alas, there was no such noble cause at work at NSE.

In the end it comes down to common problems of the real, material world... too much power—in the hands of managing director Chitra Ramkrishna and others—and inadequate regulation of it—by the management team members, board, shareholders and regulator.

The central event of the SEBI order against Chitra Ramkrishna, Ravi Narain, and others has been common knowledge for years. That she flouted several rules when she gave Anand Subramanian a job at the exchange. For this, and the co-location scam, she eventually had to exit, though the exchange allowed her a resignation-for-personal-reasons versus a sacking-for-professional-misconduct.

If most of this was was known, what's the furore about?

By itself, a wrongful appointment, that cost the exchange pocket change in remuneration and no other discernible commercial damage, would have been shrugged off. Corporate India is littered with promoters and celebrity CEOs appointing family and friends to managements and boards or doing business with them, often surreptitiously.

Of course, NSE is no family 'jaidaad'.

But, as the order shows, Ramkrishna and her mentor Narain probably came to treat it that way given that they were members of the exchange's founding team. Success can be heady and power can corrupt.

Yet, Ramkrishna's appointment of Subramanian per se is not the main plot of this story.

The real drama lies in how she was aided and abetted by everyone around her.

From mentor Narain (then NSE vice chairman) to colleagues who led HR, regulatory compliance and key teams at the exchange and toed her every line.

Her malfeasance was concealed by a board filled with stalwarts appointed as public interest directors who purposefully failed at the one responsibility they had.

And, in taking six years to prosecute, a regulator that has shown how incapable it is of regulating a systemically important market institution, the most vital to India's capital markets.

Who Is Anand Subramanian?

He was in in charge of leasing and repair of containers at Balmer Lawrie, at a salary of Rs 15 lakh per annum, before he was appointed chief strategic adviser at NSE by Chitra Ramkrishna at an extraordinary remuneration of Rs 1.68 crore-plus perks.

In three years he was promoted to Group Operating Officer with wide powers and a salary of Rs 4.2 crore. He was among the highest paid in NSE with substantial powers and yet not designated 'key managerial personnel' so as to avoid the need for board approval and regulatory compliance.

Clearly, there was an undisclosed relationship between Chitra and Anand, the nature of which is still a mystery. After six years, two forensic audits and NSE board and SEBI investigations. Go figure.

How Did Chitra Get Away With This?

She seemed to have had everyone at NSE wrapped around her finger.

SEBI's order shows they were all aware of what was going on and they all helped her hide it.

The chief people officer pretended Subramanian's appointment was kosher despite missing paperwork and due diligence. The chief regulatory officer misrepresented facts to the regulator. And the group president did as was told by the managing director. The secretarial audit firm repeatedly flagged the lack of due board process in Subramanian's appointment and the granting of wide powers to him, but was rebuffed and they too stayed silent in the annual report.

Or may be they were all in awe of her spiritual connections. Go figure.

Was The NSE Board Unaware?

Probably, at first it may have been, when Subramanian was appointed in 2013.

By 2016 though, the whistleblower complaints were public information, reported by veteran journalist Sucheta Dalal.

Board ignorance is commonplace. Board complicity is not. Yet.

In August 2015, the board delegated substantial management powers to Subramanian even though he was supposedly just a consultant/adviser.

Then onwards, Subramanian attended all board meetings even though he was not designated key managerial person, nor was his appointment and remuneration approved by the board.

It was only after SEBI pointed out the whistleblower letters did the NSE board begin an investigation. Even then it continued to conceal facts from the regulator.

Anomalies surrounding Anand Subramanian's appointment were discussed in the October 2016 meeting but the board ordered they not to be minuted.

That Chitra Ramkrishna was sharing confidential company information with an unidentified outsider, was known to the board and discussed in the December 2016 meeting. Again, this was ordered to be kept out of the minutes.

Worse still, the board shared details with SEBI about this breach of confidentiality only in 2018.

Despite all this, the board not only generously allowed Subramanian and Ramkrishna to resign, it also thanked her for her years of service and decided to violate another rule by encashing her leave.

This is a board that had three-four shareholder directors representing institutional investors and four-five public interest directors appointed by SEBI.

Whose interests was it protecting? Go figure.

What's The Yogi Angle?

Between 2014 to 2016, Chitra Ramkrishna was emailing confidential company information to rigyajursama@outlook.com. The conversations ranged from team restructuring to financial projections to business plans and even holiday looks.

"Today you are looking Awesome. You must learn different ways to platt your hair which will make your looks interesting and appealing!! Just a free advice, I know you will grab this. Keep March mid a little free."

- rigyajursama@outlook.com to Chitra Ramkrishna

At one point in 2015, NSE internal security even red flagged the communication of sensitive documents to an external email and blocked it – but Chitra overrode that and restored access.

According to NSE, Anand Subramanian was the yogi - based on the 2018 forensic investigation that found some common technical markers. And, since Subramanian was an insider, sharing information with him was permitted.

The exchange told SEBI that Chitra was "manipulated by the same man in the form of different identities; one as Anand Subramanian who enjoyed her trust and other as Mr. Rigyajursama who had her devotion".

Sigh.

SEBI remains unconvinced that yogi and Subramanian are the same. For these reasons...

• Subramanian and Ramkrishna denied he was the yogi.

• The same information would have been accessible to Subramanian in his official capacity and he didn't need to use a yogi ruse.

• If the yogi was Subramanian, why was Subramanian copied on most of the emails.

• Subramanian was also sharing official information to that email and seeking guidance.

Six years and neither NSE nor SEBI have any idea who this person was/is. Chitra and Anand's desktops were checked but laptops were not checked as they had been disposed, conveniently. Their personal emails were not examined either.

Chitra told NSE during its investigation that the email was of her spiritual guru who has no physical persona...

But he had an email address and gave hair styling tips bordering on intimate. Go figure.

What About SEBI?

What about SEBI?

For all the verbose, voluminous regulations it writes to keep companies, funds and market intermediaries in check, the Securities and Exchange Board of India should take a long hard look in the mirror and ask itself – with what authority can it demand good governance from others when it has failed so spectacularly.

These harsh words are despite an acknowledgment that when it comes to trouble in market infrastructure institutions everyone in charge of resolving it has to tread carefully to ensure systemic stability. Yup, we get that.

But, what explains why SEBI has taken six years, ordered some paltry penalties, and filed no criminal complaint against Ramkrishna, Narain, and even NSE's directors for corruption and dishonesty.

Nothing.

Instead, there's a 190-page order, replete with mindless repetition, a ludicrous discourse around this supposed spiritual guru and comments that were probably intended to be funny but only underscore the farce this investigation was.

Maybe, SEBI needs a spiritual awakening too. About its higher purpose in life.

Menaka Doshi is Managing Editor at BloombergQuint.