Sebi fines NSE Rs 50 lakh over compensation paid to Chitra Ramkrishna

NSE asked to pay Rs 50 lakh for allowing former MD&CEO leave encashment beyond 360 days

The Securities and Exchange Board of India (Sebi) has imposed a penalty of Rs 50 lakh on the National Stock Exchange (NSE) for compensation paid to former MD and CEO Chitra Ramkrishna.

The exchange had paid Ramkrishna Rs 44 crore for her three-year tenure and a further Rs 23 crore as total remuneration in the last 8 months of her tenure. Sebi got a letter from the finance ministry drawing its attention to the high compensation paid during the last 8 months of the tenure. Ramkrishna had resigned from NSE in December 2016 amid allegation of unfair practises at the exchange’s co-location facility

Following the ministry’s letter, Sebi began an examination and sought clarification from the exchange.

Upon the examination, the regulator found that NSE had permitted Ramkrishna leave encashment for a total of 528 days on cessation of her service. According to its policy, NSE allows leave encashment of up to 360 days for an employee. Sebi directed NSE to provide the applicable provisions under which the additional leave encashment of 168 days was approved.

The exchange submitted that its policy allowed senior staffers to encash their leaves without limit at the time of retirement or resignation.

However, this was done by way of policy change, which despite being approved by NSE’s board and compensation committee, was implemented without the requisite prior approval of the regulator.

“At the first instance, the said change of policy which changed the compensation structure was without preclearance by the Sebi as mandated under regulation 27(4) of the SECC Regulations and therefore, the same cannot be applied to the case of Chitra Ramkrishna. I, therefore, conclude that the charge with respect to encashment of accumulated ordinary leave by Ramkrishna over and above the limit of 360 days without taking prior approval of Sebi under regulation 27(4) of the SECC Regulations stands established,” Sebi adjudicating officer said in an order on Tuesday.

In its submission, NSE had said that it had recovered the remuneration amount paid to Ramkrishna following Sebi’s order in the co-locaton matter.

To this, the regulator said, “Although the said contentions act as a mitigating factor, but nothing prevents the NSE from taking prior approval from Sebi before making a change in its policy … post corrective measures taken may be a mitigating factor for adjudging the quantum of penalty.”