“Due to the absence of sufficient material/evidence/objective facts on record in this case, the test of ‘preponderance of probability’ fails to produce enough justification for establishment of collusion/connivance between OPG (Securities) and its directors with noticees (NSE and its ex-employees),” Sebi said in its order on Friday.The regulator’s latest order brings the curtain down on the high-profile co-location case that had rocked India’s premier stock exchange.
The case also prompted a probe by the Central Bureau of Investigation (CBI) and led to the arrest of some top former NSE officials.
Last year, the Securities Appellate Tribunal (SAT) had quashed Sebi’s 2019 NSE order and directed the regulator to re-adjudicate the issue pertaining to the charge of connivance and collusion of broker OPG and its directors with any NSE officials.
The regulator had accused NSE of giving preferential access to a few brokers to its secondary server. The genesis of the case dates back to 2015, when a whistleblower wrote a letter to the regulator alleging that NSE’s co-location system was being manipulated.
‘No Defined Co-lo Policy’
Sebi said on Friday there was no disputing the fact that NSE did not have a detailed, defined co-location policy. It even failed to monitor the use of the secondary server by trading members without having sufficient reason.
“The defence put forward by NSE about the issuance of welcome email in the form of ‘registration enablement mail’ at the time of providing colo facility to TMs (trading members), can’t be said to be justifying its role as a first-level regulator. Issuance of guidelines without its monitoring showed lack of due diligence,” Sebi said. “However, this fact on its own does not help in deciding the issue of collusion/connivance of OPG and its directors with noticees (NSE and its ex-employees).”
The fact that OPG was logging on to the secondary server till May 2015, even after the warning in the first half of June 2012, does indicate indirect consent by NSE to OPG, it said. However, the fact that 93 trading members were logging on to the secondary server during this period reduces the probability of connivance, the regulator said.
It further added that there was no new evidence in the current proceeding stemming from the earlier one.
In the same matter, through a separate 238-page order, Sebi directed OPG Securities to disgorge Rs 85 crore and also imposed a six-month ban on it. This will be in addition to the debarment of five years which the regulator had imposed on it through an April 2019 order. Sebi held that the broking firm had gained an unfair advantage by getting access to NSE’s secondary servers.
