The consent applications of 12 NSE officials show-caused by SEBI in the algo-related case of unfair access have been returned by the regulator pending investigations. SEBI has said the applications can be filed only after investigations are complete.
After a probe by two of the large forensic accounting firms and a technical advisory committee consisting of external experts, SEBI is now conducting its own investigations and may frame charges in the matter by March 31.
‘Not an admission’
In terms of regulation 5(1)(B) of SEBI Act 2014, which deals with the consent mechanism, no application for settlement can be considered if an investigation into the matter is not complete.
“An individual who is a man of principles and who has not done any wrong will not go for consent, but for institutions, the situation is different,” said JN Gupta, former ED, SEBI. “Even if the institution is not wrong and is principled, it may opt for consent as it has to take into account the organisation’s interest in a holistic manner.”
He added: “Rather than spending precious time and money on needless litigation, they may settle, especially when it doesn’t attach any taint. It is a practical solution thanks to the archaic judicial system. At this juncture, no one knows the truth.”
Facing flak from legal experts for its ad-hoc settlement of cases under consent, SEBI had in 2012 tightened the rules to exclude serious market manipulation cases, insider-trading and front-running among other offences from its consent terms.
The NSE has so far transferred into a separate account the ₹375 crore that it may have earned from its co-location facility from September 2016 to March 2017. But if SEBI moves towards consent, it would have to consider the gains made by the exchange between 2010 and 2014 from its co-location and algo systems, when it is alleged that the ‘unfair access’ was provided.