Sebi penalizes NSE for irregularities in compensation of its former top bosses
Sebi charged the country’s largest stock exchange for irregularities in compensating Ravi Narain and Chitra Ramkrishna
The Securities and Exchange Board of India (Sebi) on Tuesday imposed a penalty of ₹50 lakh on the National Stock Exchange of India (NSE) for irregularities in compensating its former top bosses Ravi Narain and Chitra Ramkrishna.
The order of the regulator said NSE had violated norms as it made amendments to the compensation policy of senior management without regulatory approval, which is mandatory under 27(4) of Stock Exchange and Clearing Corporation (SECC) regulations. These regulations state that the terms and conditions of the compensation approved by Sebi shall not be changed without its prior approval.
A spokesperson for NSE did not comment on the Sebi order.
The controversy arose after NSE’s 2016-17 annual report showed Ramkrishna’s compensation for the eight months before she stepped down on 6 December 2016 was ₹23 crore, whereas for the three years as managing director (MD) and chief executive officer (CEO) her remuneration was ₹44 crore. Following this, the finance ministry referred the matter to Sebi for action.
Leave encashment of up to 360 days is permitted for an employee, according to NSE policy. However, Ramkrishna was compensated for 528 days, which led to additional compensation of ₹1.5 crore. Similarly, Ravi Narain, a former MD and CEO of NSE, whose tenure ended on 31 March 2013, was paid accumulated ordinary leave encashment of 381 days. The top management was allowed to encash leave above the prescribed limit after a decision by NSE’s compensation committee on 26 November 2012 that in case of senior management, accumulated ordinary leaves would be allowed to be encashed without limit at the time of retirement.
Sebi held that the policy change approved by the compensation committee or NSE board cannot be implemented without its prior approval and, thus, the grant of leave encashment led to non-compliance with the provisions of SECC regulations.
In February 2018, Ramkrishna and Narain returned the money, after Sebi told NSE the previous month to recover the additional compensation from them.
NSE on its part argued that it did not violate SECC norms, as the terms and conditions of the remuneration were not changed, the compensation policy was approved when Sebi approved Ramkirshna’s appointment as NSE chief and by recovering the so-called additional remuneration, the exchange also took steps to address Sebi’s concerns.
However, Sebi held there was no evidence to suggest that changes in the terms and conditions of the compensation structure which benefitted its senior management, including its MD, was communicated to Sebi for its approval.
“I also note that NSE has failed to take corrective steps and they have not furnished any material to suggest that they now have applied for post facto approval of Sebi under regulation 27(4) of the SECC Regulations about the said change,” said the Sebi adjudicating officer in the order.
“Being the leading regulated stock exchange in India, (NSE) should have set higher standards of compliance, which is found missing in the present case,” Sebi said in the order
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