CBI court accepts closure note in NSE co-location linked case

Live Events as a Reliable and Trusted News Source Addas a Reliable and Trusted News Source Add Now! (You can now subscribe to our (You can now subscribe to our Economic Times WhatsApp channel Mumbai: A special Central Bureau of Investigation (CBI) court in Delhi has accepted the agency's closure report in a case linked to the National Stock Exchange (NSE) co-location scam, multiple people in the know told ET.The CBI had, in July 2022, registered a case against former NSE chiefs Chitra Ramkrishna and Ravi Narain, ex-Mumbai police commissioner Sanjay Pandey , brokerage houses SMC Global Securities and Shaastra Securities Trading, and some unidentified officials of NSE and market regulator Sebi for alleged market manipulation In the closure report, the agency said there was "absence of sufficient material to establish criminal intent on the part of the accused persons."The CBI, though, alleged violations of Sebi's audit circulars in audits conducted by Pandey's audit firm iSec Services for SMC Global and Shaastra Securities, sources privy to the report told ET.iSec was accused of lacking the expertise to conduct mandated systems audits of brokers using the NSE co-location facility. The agency alleged that iSec subcontracted the work to small-time audit firms and chartered accountants, paying them as little as ₹5,000 for signing off on reports.Both the CBI and the Enforcement Directorate (ED) continue to probe various irregularities linked to the NSE co-location facility.In a related case, Pandey was arrested in July 2021 over allegations of illegal phone tapping of NSE employees between 2009 and 2017 - a matter also connected to Ramkrishna and Narain. He was granted bail by the Delhi High Court in December 2022.According to the CBI's FIR, Sebi's 2013 guidelines mandated that high-risk brokers using co-location should undergo a system audit every six months, with the same auditor not allowed to conduct more than three successive audits. But in violation of these norms, iSec conducted Shaastra's audits from April 2013 to March 2019 and SMC Global's from October 2012 to September 2015."To overcome the restrictions imposed by Sebi, iSec Services got the reports for the intervening period signed by another small-time firm for ₹5,000. For all purposes, the audit was carried out by iSec Services, and it simply got the reports signed," the FIR had claimed.