The saga of NSE’s ‘virtual yogi’

The Invisible Hand

As one who had been closely associated at board or advisory levels in institutions like the SEBI, NSE, BSE, et al., in the 1990s, I fairly fell off the chair when I read the story about Chitra Ramakrishna, the former managing director of the National Stock Exchange (NSE).

According to SEBI, NSE’s five-year plan, dividend decisions, business plans, board agendas and even key appointments and performance evaluations were all shared by the MD with some unnamed, anonymous and ‘virtual yogi’, with whom she was in touch for 20 years, but had never met once! Apparently, this unknown ‘yogi’, represented only by the email id [e-mail] — the names of three of the four vedas, no less! — was privy to every conceivable confidential information, had knowledge of the entire management team, and the organisation and decision structure of the NSE intimately, and routinely gave directions to the MD, including who should be appointed, promoted and given a raise, and when!

According to SEBI, Chitra, who took over as the MD of the Exchange in 2013, gave “frequent, arbitrary and disproportionate” increases in compensation to one Anand Subramanian, without so much as a performance evaluation. Consider this: Subramanian was earning a salary of Rs 15 lakh in 2013, when Chitra was directed by the ‘yogi’ to hire this worthy at over Rs 1.25 crore, and then rapidly raise his compensation to around Rs 5 crore by 2015. And what is more, he was only a part-time consultant and adviser! And yet, he was designated Group Operating Officer! Chitra took these decisions, and the board presumably ratified them all.

True, senior politicians, civil servants and other big cheese in India routinely consort with self-appointed god-men/women. But so far at least, none of them were imaginative enough to take all their decisions at the dictates of a virtual shiromani. This is a clear first.

The serious misdemeanour of sharing confidential board-level information with an outsider apart, how could any sane, savvy, sensible and self-respecting CEO, not a schizophrenic, allow a virtual email id to practically run the country’s largest stock exchange, involving the investments of tens of crores of investors?

And while it has not been possible to identify the precise composition of the Board of NSE during Chitra’s tenure, the members do make Satyam’s board look like alert angels.

It is not as if the sordid matter is from the bygone era when Indian corporate bodies had little familiarity with good governance. We are talking of times when corporate governance has supposedly come to the forefront with the new Companies Act.

What is intriguing is that while SEBI has produced a 190-page report on the scam, the regulator of stock exchanges in the country was clueless for nearly a decade of such shenanigans at the NSE, situated a mere stone’s throw away! Did SEBI try to use the government machinery to trace the source of that email id? Did they file an FIR against Chitra?

Also, if SEBI is investigating the then-NSE Board members, which included representatives of large institutional investors, on how they cleared arbitrary appointments like that of a COO, we are yet to hear about it.

Our largely tame and un-investigative media hasn’t yet begun to ask too many difficult and inconvenient questions of either NSE or SEBI or those institutional bigwigs. So, we do not know if the NSE had a functioning whistle-blowing policy. We do not know exactly how the sordid affair came to light. Nor who blew the whistle. We are also told that the laptops of Chitra and Anand Subramanian have been destroyed by the Exchange as e-waste! Is that standard operating procedure at NSE? We do not know. Who were the members of the board at the time all this was taking place? Is any action being taken against them? We do not know.

We understand that SEBI has gently rapped Chitra on the knuckles with a fine of Rs 3 crore, the former MD Ravi Narain and Subramanian Rs 2 crore each, for violating securities contract rules. Contrast the fines with the Rs 44 crore that Chitra took home in pending dues when she resigned “over some sharp differences with some board members” a year ahead of the end of her term in 2016-17. What were those differences? You guessed it. We do not know.

Such paltry fines fly in the face of international practices in more developed markets. For instance, according to the chairperson of the Securities and Exchange Commission (SEC), USA, “Meaningful monetary penalties —whether against companies or individuals — play a very important role in a strong enforcement programme.” Little wonder then that SEC is known to levy hefty fines on those that cross the lines of probity.

To cite an example, for violating auditor independence norms, in 2021, SEC charged one of the partners, the then Chief Accounting Officer, and two of the former partners of Ernst & Young LLP $10 million in “monetary relief” for settling all the charges. Poor Rajat Gupta was jailed in the US for a far lesser offence. His was at most a momentary lapse of judgement.

Here we are talking of the CEO of an institution of national importance sharing every conceivable board information with an outsider for years. It would seem to me that the charges against the CEO of NSE and its board are far more serious. The truth is, fines in India border on being more of an incentive than a deterrent.

It is strange that we have little information on the possible fraud angle to the entire ludicrous episode, calling for a much greater scrutiny by the country’s investigative agencies. Could it have been the MD herself who had created the myth of the yogi? Could it have been Subramanian, who seems to have been the key beneficiary of the appointment, who was the architect of the fiction of the virtual yogi? Could it have been other desperate elements who had created the fictional yogi’s email id to benefit massively through insider trading, with no accountability whatsoever? We have many questions but few answers.

(The writer is an academic and author of several books)