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Indian stock exchange shaken by alleged scam involving a yogi and a highly paid adviser

In 1992, India was bruised by an unprecedented scam at the Bombay Stock Exchange, which defrauded investors of more than $13.6 million.

When officials began work to set up another exchange that would trade transparently, they roped in a talented young woman renowned for her sharp financial market skills.

Ms Chitra Ramkrishna proved instrumental in setting up the National Stock Exchange (NSE), overseeing its growth to become one of the top bourses in the world, including as its managing director and chief executive from 2013 to 2016.

Her achievements led her to being hailed as "queen of the bourse".

But in a spectacular and bizarre downfall that has gripped the country, Ms Ramkrishna, 59, has emerged as a key figure in another scam that has raised worrying questions about the integrity of corporate governance in India.

According to the Securities and Exchange Board of India (Sebi), she is alleged to have shared confidential information, including the NSE's five-year projections and board meeting minutes with an unknown Himalayan ascetic who had been "guiding her for the past 20 years" and had access to e-mail communication.

Ms Ramkrishna, who was described by Sebi as a "puppet" in the yogi's hands, has also been held guilty of hiring a man named Anand Subramanian as her chief strategic adviser on very generous terms. The position was neither advertised nor was any other person considered for it.

A Sebi order on Feb 11 said Ms Ramkrishna had also indulged in a "financial misdeed" by increasing Mr Subramanian's compensation arbitrarily and disproportionately.

When he joined in April 2013, his annual compensation was 16.8 million rupees (S$300,000), more than 11 times the 1.5 million rupees he earned in his previous job. By April 2016, his pay had ballooned to 42.1 million rupees.

Ms Ramkrishna left the NSE abruptly in December 2016, citing personal reasons, after spending three years in the top post.

Her tenure was also tainted by a scandal in which certain traders managed to access privileged trading information. India's Central Bureau of Investigation (CBI) is investigating this case.

In 2019, Sebi directed NSE to deposit nearly 10 billion rupees in an investor fund and barred it from accessing capital markets for six months. Two former CEOs - one of them Ms Ramkrishna - were asked to give up 25 per cent of their salaries drawn during a certain period.

The CBI has now arrested Mr Subramanian, 55,  and there are strong suspicions based on digital forensic evidence that he was the mystical yogi e-mailing Ms Ramkrishna and convincing her to give him extra pay. A court has rejected anticipatory bail for Ms Ramkrishna, and the CBI is expected to arrest her soon.

In its February order, Sebi also imposed a penalty of 30 million rupees on Ms Ramkrishna, 20 million rupees on former board member Ravi Narain and 20 million each on NSE and Mr Subramanian.

The embarrassing revelations of a top corporate leader taking advice from an unknown third party, as well as appointing and favouring a person in violation of the rules, have triggered questions about checks and balances in the system.

The NSE board's conduct was "irresponsible, at worst it could be termed complicit", said independent banking analyst Hemindra Hazari.

Despite being aware of Ms Ramkrishna "divulging confidential information to an anonymous individual" and excessively rewarding another, the board had allowed her to resign and lauded her "sterling contribution".

As for whether the regulator could have done more, Mr J.N. Gupta, founder of Stakeholders Empowerment Services and a former executive director of Sebi, said: "From a regulatory angle, I believe Sebi has done enough. It removed the board, brought a new CEO, and now has imposed a penalty on Chitra Ramkrishna."

He added: "The confidential information she shared didn't impact the ordinary investors. A majority of the NSE's highly technical operations don't even involve human intervention, and its trading system and risk management remain among the best in the world."

An NSE spokesman told The Straits Times that the events in question took place more than six years ago. Since then there have been several changes within the organisation to enhance accountability.

"NSE has operationalised the directives of Sebi on various matters over the years and has taken various measures to further strengthen the control environment including the technology architecture," the statement said.

The exchange was committed to the "highest standards of governance and transparency" and would cooperate fully with Sebi.

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