SAT partly set aside Sebi's order against NSE in unlit fibre case

The Securities Appellate Tribunal (SAT) has set aside a markets regulator Sebi's order directing the National Stock Exchange (NSE) to disgorge Rs 62.6 crore, along with interest, in the dark-fibre case.

However, all other orders passed against NSE, comprising a periodic review of its co-location facility, putting in place comprehensive guidelines, Standard Operating Procedures and protocols with respect to its co-location facility were found appropriate and were upheld, according to an SAT order.

In addition, the appellate tribunal has quashed Sebi's direction barring NSE's former MD and CEO Chitra Ramkrishna from holding any managerial positions in a market intermediary for three years and three other former officials --Ravi Varanasi, Nagendra Kumar and Devi Prasad Singh -- for a period of two years.

The case relates to the alleged differential access given to certain broking firms in the form of 'dark fibre' at NSE, to connect across the co-location facilities before other members.

Dark fibre or unlit fibre, with respect to network connectivity, refers to an already laid but unused or passive optical fibre, which is not connected to active electronics/equipment and does not have other data flowing through it and is available for use in fibre-optic communication.

The order came after 11 entities challenged Sebi's order passed in April 2019, against 17 entities, including NSE, its former officials and stock brokers.

In its order, Sebi alleged that NSE was negligent in not carrying out due diligence while allowing an unauthorised vendor to provide P2P connectivity to its trading members.

Partly quashing Sebi's order, the appellate tribunal said that "the direction to disgorge an amount of Rs 62.58 crore along with interest cannot be sustained and to that extent, the order is quashed".

It further said that other directions passed by Sebi against NSE "are affirmed and are appropriate".

"Since we have set aside the unlawful gains, we direct SEBI to refund a sum of Rs 62.58 crore along with interest accrued on it to the appellant within four weeks from today. We further vacate the direction given to the appellant for depositing the revenues emanating from co-location facility, etc. in an escrow account and the details to be submitted to Sebi from time to time," SAT said in its 111-page order passed on Wednesday.

Also, SAT has quashed Sebi's order that directed Way2Wealth Brokers to disgorge Rs 15.34 crore and GKN Securities to disgorge Rs 4.9 crore.

It upheld the market regulator's directions that restrained W2W and GKN Securities from accepting, inducting or enrolling any new client for one year and barring them to undertake any trade in their proprietary accounts for two years.