Chitra Ramkrishna, NSE, a faceless yogi: The unbelievable story so far

India's financial news is turning out to be quite a shocker because officials have recently found in 2022, that some deeds of 2016 are apparently not as prudent as they should have been. While an ex-CEO and MD of the country's National Stock Exchange followed the guidance of an unknown spiritual guru (who is physically absent but can reply to mails) to take big business decisions, while casually breaching laws and regulations in the name of spirituality, here is everything we know so far about this weird story in 10 points:  

1. THE SO-CALLED GURU/HERO – THE UNKNOWN HIMALAYAN MAHARATHI

1. An unknown sage of the Himalayas has become a curiousity driver / headline maker in India’s business world as the country (and the world) ponders on the drama that has unfolded recently.
2. A person who doesn’t need to physically manifest himself – so, essentially, a faceless entity - has been guiding the financial and operational decisions of one of India’s biggest financial stock exchanges i.e the National Stock Exchange (NSE), a company that is awaiting to be listed for years.
3. The guru who was physically present once upon a time, but currently has no physical existence, had been guiding the ex-CEO and MD Chitra Ramkrishna via emails on the everyday operations of the company. Ironically, the guru's email id seems to be a combination of the three Vedas - Rig Veda, Yajur Veda and Sama Veda - thereby combined to form rigyajursama@outlook.com. (If you're shocked at this, put your seat belts on, because this ride is about to get real crazy.)

2. WHO IS CHITRA RAMKRISHNA? 

Chitra Ramkrishna was on the board of directors of the National Stock Exchange, India's premier stock exchange, from April 2013 to December 2016. She is a Chartered Accountant from India and also holds a degree from the Chartered Institute of Management Accountants, UK. Chitra was the third woman to head an exchange in the Asia-Pacific region after Sri Lanka’s Colombo Stock Exchange and China’s Shenzhen Stock Exchange. 

Chitra was appointed joint Managing Director of NSE in 2009 and promoted to CEO in 2013. She was finally made to leave her job but her on-record reason for quitting the post remains 'personal reasons'. 

 Chitra Ramkrishna. Photo: Getty Images

1. Guidance is a two-way street - when one asks, one receives. Chitra is known to have have shared the financial and business plans of NSE along with dividend pay-out ratios, business plans and the performance appraisals of NSE employees. This includes the organisational structure, financial results, human resources policy, and related issues, responses to regulators, etc.
2. What's even more surprising is the fact that there was a suspicious appointment that was made of an executive. The executive had no capital market experience (which is obviously required in a stock exchange), was appointed directly as an adviser to Chitra with inadequate documentation and if that was not enough, for a salary higher than most senior NSE officials. 
3. The guru guided her on everyday operational details like: Who to appoint in what roles, Who to promote, Who was to travel and where did they have to travel, etc. There was also personal life guidance like, How to look younger and nicer, What kind of hairstyles to try, etc. There were even talks about holidaying in Seychelles where they both could go swimming together.

via GIPHY

4. THE CURIOUS CASE OF AN UNKNOWN APPOINTMENT

In 2013, Chitra appointed a person called Anand Subramanian, as a ‘Chief Strategy Advisor’. He was apparently personally interviewed by Chitra and the salary that was payable to him was agreed to be Rs 1.68 crore. Over a period of 3 years, his salary and power grew exponentially to Rs 4.21 crore, though his working days increased only from a mere 4-day working week to a 5-day working week, of which he was only required to be in office for 3 out of 5 days.

However, the problem with this was that in a company like NSE, where the total value of the companies traded on NSE is almost 1.5 times India’s GDP, there were no HR records of this particular appointment. There were no records of his on-boarding process, interview rounds, no advertisements for his role, no records of others having applied for this role, or others being interviewed or rejected.

Second, his previous salary was around Rs 15 lakh, when he was a vice-president in a small company called Transafe Services, that is in the leasing and repair industry, and was a previous subsidiary of Balmer Laurie & Co, a government company. When a person changes fields and comes into a new one without basic knowledge or experience, a salary hike by 9 times is rare, if it is even present.

Also, whistleblowers complained to SEBI about this particular appointment not being declared as a Key Managerial Personnel (KMP). Meaning, every high level appointment like that of a CEO, CFO, MD, etc., is classified as a KMP appointment and requires even more disclosures than that of normal employees. The documentation is stricter and is usually checked by audit teams very closely. 

But Chitra apparently did not document any of this process and hired him as a consultant, which she said was not like an employee. She even paid him more, like a privileged individual, and gave him perks like travelling to Chennai every week, by either first class or business class. 

5. BUT, HOW DID THEY COME ACROSS THIS?

You might remember that scene from the movie Guru, where traders shout out the cost of a particular item to trade it in the stock exchange and there are a hundred traders shouting the price on the top of their voice. Now, this system is outdated and all the trading happens electronically; but the thing is, when you trade electronically, you cannot know the expected final price of an item. Which is why, if you get to know the expected price of a stock earlier than others, you will benefit from it as you can make easy profits.

Between 2015-16, SEBI and the government received a series of anonymous whistleblower letters which talked about the corporate governance lapses at NSE. While some talked about a few brokers receiving preferential access to NSE servers through a co-location facility, others spoke of in Between 2015 and 2016, Sebi and the government received a series of anonymous whistleblower letters. It is not clear if all the letters came from a single whistleblower. All the letters broadly made allegations over corporate governance lapses at NSE, but the specifics of each were different. For instance, a whistleblower letter in January 2015 talked about a few brokers who received preferential access to NSE servers through a co-location facility. Similarly, the market regulator received two whistleblower. the elevation of Anand Subramanian. 

6. THE CO-LOCATION ISSUE 

The first whistleblowers found that many brokers' computers were linked to NSE’s systems and since they were linked, they were getting information just a few seconds earlier than others, which got the algorithmic traders more profits. This phenomenon was called the ‘co-location’ issue, which showed that NSE’s systems were compromised, which led to management changes in the NSE. But all of this happened during the reign of Chitra and her team, which eventually caused her to leave due to 'personal reasons'.

7. WHAT DID THE SEBI FIND?

When SEBI conducted an investigation into the co-location issue, it also came across documentary evidence which showed that Chitra (Noticee 1) had shared certain confidential NSE information with an unknown person during 2014 to 2016. The NSE management then found the mails between Chitra and the so-called wise man. The controversy first erupted in 2015-16, but when Chitra and Anand both quit in 2016, the matter died down.

CBI too got fresh evidence and on the orders of the court, the CBI filed an FIR in a co-location case in 2018. The CBI case was against a stockbroker who had allegedly manipulated NSE's system with help from then-top officials to get access before anyone else to markets when they opened. The CBI named Sanjay Gupta (promoter of OPG Security Pvt Ltd), Aman Kokrady, his brother-in-law, and data cruncher and researcher Ajay Shah as accused in the case, along with unknown officials of the NSE and SEBI.

In 2019, SEBI asked NSE to disgorge Rs 624.89 crore and barred it from accessing the market for funds for 6 months. Ramkrishna and Anand both had to also give away 25% of their salaries during a certain period.

8. THE JUICY MAILS

Earlier, the SEBI was only concerned with the co-location issue, which was serious in itself. But SEBI is now acting on the breach of confidentiality which was done between Chitra and her faceless yogi. The issue resurfaced after the latest SEBI order, which revealed some highly unusual details of the last few years of her tenure at the NSE.

SEBI's probe on this issue listed a final 190-page report on its website against Chitra and her jhol team and has disclosed that:  

1. The Board of Directors of NSE were aware of the exchange of confidential information between Chitra and the baba, but had chosen to "keep the matter under wraps".
2. Despite knowledge, the Board allowed Chitra to resign and leave and took no action against her. Ironically, they thanked her for her services (which is not going to be a pretty fact going forward as the probe widens).
3. SEBI fined NSE Rs 20 million and has barred the exchange from launching any new products for six months.

9. WHAT'S HAPPENING AS OF TODAY? 

The consequences of this mess have just begun and for starters, 

1. SEBI has slapped a fine of Rs 3 crore on Chitra for the illegal appointment of Anand Subramanian, Rs 2 crore each on NSE, Subramanian and former MD and CEO Ravi Narain, and Rs 6 lakh on VR Narasimhan, who was the Chief Regulatory Officer and Compliance Officer.

2. Further, Ramkrishna and Subramanian have been restrained from associating with any market infrastructure institution or any intermediary registered with SEBI for 3 years, while the same for Narain is 2 years.

3. The Central Bureau of Investigation (CBI) has questioned both Chitra and another former chief of the NSE, Ravi Narain, in relation to the colocation issue and have issued a lookout notice against Chitra Ramakrishna, Anand Subramanian, and Ravi Narain.

4. The Income Tax department has raided the Mumbai residences of both Chitra and Anand to check charges of tax evasion and financial irregularities against her and others.

This is a classic case of Management Override of Control, where the management helps the company in conducting frauds by intentionally hiding their activities and bypassing stringent regulatory requirements. The case reeks of violations of trust, laws and regulations and also will lead to unknown financial consequences for all involved. It also proves to be blatantly breaching 'Confidential Clauses' and questions the basis by which the public trusts entities like these. 

It reminds us of the scams that came through those purana, unregulated government departments which are left unchecked due to lack of accountability and responsibility. 

This might also affect the stakeholders, especially the auditors, who are meant to keep an eye on frauds like these.