SEBI Imposes Rs2 Lakh Penalty on Excel Stock Broking Promoter, System Administrator

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The Securities and Exchange Board of India (SEBI) has imposed a fine of Rs1 lakh each on the promoter-manager and system administrator of Kolkata-based Excel Stock Broking Pvt Ltd for breaching access provisions to the secondary servers of the National Stock Exchange. the colocation facility (Colo) of (NSE).

In an order, Soma Majumder, Arbitrator (AO) of SEBI said, “There are no investor complaints on record resulting from a breach by the notices…I also note that the notice except for the fact that the notices provided incorrect and contradictory statements for two specific requests from the investigating authority (IA), the evidence available on the record shows that the notified parties extended their cooperation to the IA in the majority of cases.”

During the investigation, the IA had asked the notaries, Anil Kedia, promoter-director and Nagendra Yadav, system administrator of Excel Stock Broking, if they were aware of the directives provided by NSE concerning the connections to be established with the server secondary. On April 16, 2013, NSE colo support emailed Ravi Sharma on his official and personal ID card.

On May 3, 2019, Mr. Kedia and Mr. Yadav told the IA that they were unaware of such an email. However, in response to a question from the AI, on September 3, 2019, they both stated that, from their recollection, they had read the guidelines received from NSE.

“The incorrect and contradictory statements made by the notified parties in their statements filed with the IA demonstrate that they have not fulfilled their obligations under Article 11C (2) of the SEBI Act.

In light of the foregoing, I conclude that the allegation that the notifications violated Section 11 C(2) of the SEBI Act is established,” said Ms. Majumder, the AO of SEBI in an order issued on 29 July 2021.

During the hearing, Mr. Kedia and Mr. Yadav argued that SEBI issued notices after a six-year delay.

SEBI clarifies that “it conducted a detailed investigation from 2018 to 2020 involving various brokers, including the notified ones, when these entities continuously connected to the secondary server from 2010 to 2015, after which it was deemed appropriate to know if the notified connected to the secondary server without NSE’s authorization, and the show cause notice was published in October 2020, so there was no delay.

In 2015, an anonymous whistleblower wrote to Sucheta Dalal. editor of Moneylife alleging that certain trading members of the NSE, who had subscribed to the Exchange’s co-location server, were gaining an unfair advantage through faster access to the Exchange. The whistleblower also alleged collusion by NSE officials.

We can recall that Moneylife was the first to expose this scam in mid-2015, for which NSE had filed a defamation suit against us. A single judge in Bombay HC dismissed the frivolous lawsuit and ordered the NSE to pay a fine of Rs50 lakh (mainly to two hospitals in Mumbai). After appealing the order, NSE paid the fine. Meanwhile, as a result of the scam, NSE’s top brass had to resign and a new management team took over.
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