The Securities Appellate Tribunal (SAT) has granted interim relief to academic Ajay Shah, along with his sister-in-law Sunita Thomas and brother-in-law, banned by the Securities and Exchange Board of India (SEBI) from being associated with the securities market for misusing data from the National Stock Exchange of India Ltd (NSE) for commercial gains in the co-location case.
In an order published on SAT's website on Wednesday, the tribunal held that the alleged violation took place almost a decade back.
"Prima-facie, at this stage, we are of the opinion that the alleged violation, if any, was in the year 2009. More than 10 years have elapsed and the appellants were associated with the market during this period and no compliant on any other score has been found against them," said Justice Tarun Agarwala, Presiding officer SAT.
SEBI had held that Shah, along with his sister-in-law and an NSE official, “have collusively worked to fulfil their commercial goals by fraudulently using the data that was obtained by them from NSE to develop algo-trading software and products." This trading software was used for sale to market participants for dealing in securities market. Some of these products were allegedly used by some firms for unfair access to NSE’s systems.
NSE had engaged the services of Infotech Financial Services Pvt Ltd to build a liquidity index or LIX. This project, according to Sebi’s 40-page order, “involved inherent conflict of interest". One of the directors at Infotech was Sunita Thomas, Shah’s sister-in-law, and wife of Suprabhat Lala, assistant vice-president, NSE.
Shah in his appeal had argued that he was on several committees and continuing the directions in the SEBI order would lead to his removal.
"He would be removed from these committees and that his reputation as a Financial Advisor would take a bashing," Shah's counsel told SAT.
While passing the order granting interim relief, SAT said "the data which is alleged to have been used by the appellants (Infotech and others) for preparation of Algo trading software was explained by NSE to be in the public domain in related proceedings made against NSE."
Taking these points into consideration SAT granted interim relief to Ajay Shah, Sunita Thomas, Suprabhat Lala and Infotech Financial Services Pvt Ltd. SAT has given SEBI six weeks to file a reply.
Separately, former chief executive of NSE, Ravi Narain, has also moved SAT against the SEBI order that barred him from associating with any listed entity for five years for his alleged role in the co-location case. Following SEBI directions, Narain stepped down from the board of two companies - Escorts Ltd and agro chemical company PI Industries Ltd.
SAT will hear the matter next on 14 May.