By IE&M Research
Investing hard earned money in equities has always been considered by small investors a big gamble. Now first with the hush-hush rumors and later with the allegation that India’s top stock exchange NSE favoured some of its clients, giving them preferential access to trading information, has given a big blow to their faith in the functioning of this premier institution. The allegation has tattered the reputation of Indian stock market, in fact.
For more than two years the exchange has been battling allegations that it gave some of its clients preferential access to servers at its colocation centre between 2010 and 2014. The die was cast over the functioning of the NSE long back, but its mighty officials with huge bounty were able to keep it under the carpet. Now the investigation is also turning out to be a farcical drama as media reports indicate that the exchange is negotiating with market regulator the Securities and Exchange Board of India a massive consent order of between ` 250 crore and ` 500 crore.
Why regulator is engaging in this is another question. The same regulator in a letter of May 31 had asked the exchange to stop its proposed IPO “as certain regulatory/policy issues are under examination”. To think of it as a simple case one must take into account that the SEBI had issued show cause notices to the exchange as well as 14 individuals, including former managing directors Chitra Ramakrishna and Ravi Narain. Narain, who was the vice-chairman, quit on June 2 while Chitra had resigned in December 2016.
The allegations raise serious question over violation of corporate governance norms, and conflicts of interest of the top managers and former board members. NSE may come out of this muddle for lack of evidence and get past the big IPO, yet the questions that have arisen in the minds of investors will still have a cloud of suspicion and it’s certainly not good for the stock market.
The way, exchange is parleying with the regulator for a consent order, has in fact reinforced the allegations. A new board is in place which must come out with a strong message in word and action assuring the investing public that now all is well, otherwise it will keep carrying the burden of what may have happened in the past. NSE chairman Ashok Chawla and SEBI chief Ajay Tyagi jointly try to close this chapter as soon as possible.
India can’t afford such happenings at its premier institutions at this stage anymore. It has to move forward.
