New Delhi: Markets regulator Securities and Exchange Board of India (Sebi) imposed Thursday a penalty of rupees six crore on the National Stock Exchange (NSE) for picking up stakes in six entities. Among the entities were CAMS and Power Exchange India Ltd. The NSE did so without obtaining SEBI’s approval.
Apart from CAMS and Power Exchange India Ltd (PXIL), the exchange acquired stakes in NSEIT Ltd, NSDL E-Governance Infrastructure Ltd (NSEIL), Market Simplified India Ltd (MSIL) and Receivables Exchange of India Ltd (RXIL).
Sebi conducted an examination to ascertain whether the NSE violated the regulatory norms.
During the examination, the regulator found ‘noticee (NSE) had engaged, directly and/or through its wholly-owned subsidiary NSICL, in activities that are unrelated/non-incidental to its activities as a stock exchange by way of acquisition of stakes in PXIL, CAMS, NSEIT Limited, NEIL, MSIL, and RXIL without seeking approval of Sebi’.
Through such acts, NSE has violated the provisions of Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) or SECC norms, it said in the order.
Although there are no investor complaints on record arising out of such lapses, Sebi said the violation, in this case, is serious in nature. Further, the exchange has failed to take corrective steps and have not furnished any material to suggest that it has applied for post-facto approval of Sebi about these investments, the regulator noted.
NSE, being the leading regulated stock exchange in India, should have set higher standards of compliance which are found lacking in the present case, Sebi said. It further said that the violation is repetitive in nature and has continued for a long period.
According to Sebi, the importance of compliance with SECC norms is further evident from the fact that any irregularity, or misconduct in other business activities, ‘if done by the entity like noticee, may cost it dearly and it may lead to violation of the condition of grant of recognition to be a fit and proper person if that irregularity or the misconduct has a potential to affect the noticee’s general reputation, record of fairness and integrity’.
The regulator also said that each investment activities constitute an independent violation and as such there are six instances of violations and accordingly a penalty of rupees six crore has been imposed on NSE.
