Market regulator SEBI accepted NSE's application to settle long-pending co-location and dark fibre cases by accepting the settlement terms and with payment of ₹1,491 crore. According to reports from The Hindu BusinessLine, the co-location case relates to allegations that certain brokers received preferential access to market data ahead of other participants, while the dark fibre matter pertains to allegations of preferential connectivity through the exchange's fibre network. These cases were investigated by different investigating agencies for over two decades before the settlement was reached.
Legal experts have raised concerns about the deterrent value of enforcement actions when cases remain unresolved for extended periods. Sonam Chandwani, Managing Partner and founder of KS Legal & Associates, stated there is legitimate concern that the deterrent value of enforcement may be diluted where matters involving allegations of significant market impact remain unresolved for many years and are ultimately settled on terms that appear modest when compared to the alleged gains or the scale of the violation. As reported by The Hindu BusinessLine, a delayed resolution coupled with relatively low monetary consequences can create a perception that regulatory risk is manageable and may inadvertently embolden non-compliant market participants.
Nirali Mehta, Partner at Mindspright Legal, explained that a regulator's approach in a particular case might depend on several factors such as the role of entity, the degree of culpability, investor harm, the extent of unlawful gain, mitigating factors, cooperation during the investigation, and past actions against entities. According to The Hindu BusinessLine, Abhiraj Arora, Partner at Saraf and Partners, noted that the NSE matter should be viewed in the broader context as it travelled from SEBI to SAT and ultimately the Supreme Court. Pradyun Chakravarty, Partner at King Stubb & Kasiva, added that when the money made from wrongdoing looks many times larger than the money paid in penalty, it is fair to ask whether the punishment actually stings enough to change behaviour.
Despite concerns about monetary penalties, legal experts highlighted that other enforcement measures can be more impactful than fines alone. Chakravarty noted that orders such as disgorgement of ill-gotten gains, bans from accessing the market, tighter compliance requirements, governance overhauls, and plain reputational damage often hurt significantly more than the fine itself. As reported by The Hindu BusinessLine, Arora emphasized that in orders where disgorgement runs into crores, the economic consequence can itself be significantly greater than the penalty. Going forward, SEBI could help itself by being more transparent about how it arrives at settlement figures and by simply moving faster on these cases.
