How can NSE investigate its own mistakes?

In an interesting development on an extremely sensitive, serious and relevant matter pertaining to NSE and the co-location facility provided by it to select brokers, SEBI has now asked NSE to investigate internally about the possibility of its own officials' collusion with the brokers for preferential treatment. According to the media reports, SEBI had earlier initiated a probe when it received a complaint from a whistleblower about the unfair access to certain brokers.

NSE has always refuted the charges and the news reports pertaining to the matter. The issue is more pertinent now that NSE is looking to raise funds through its initial public offering of shares. SEBI is reported to have written a letter to the NSE Chairman based on its findings by an expert committee (Technical Advisory Committee-TAC) on the practice of co-location, or placement of servers belonging to the brokerages adjacent to those of the exchange for a fee.

This co-location facility is believed to have provided the brokers an advantage in terms of speed, thus, placing general investors at a disadvantage. In a fresh development, SEBI has now asked NSE to place all the revenue stemming from the practice including fiber connection between broker's co-location facilities and their offices in an escrow account.

What remains unanswered is what happens to the transaction charges levied by the stock exchange on the huge volumes generated from the very co-location facility. Should not the exchange's transaction charges also be deposited in the same escrow account as above? DSIJ had in its report titled “The dark (fiber) side of NSE” on April 19th raised similar concern on NSE's operational lapses providing undue advantages to certain brokers.
 
http://www.dsij.in/article-details/articleid/14026/the-dark-fibre-side-of-nse.aspx

Globally, the chorus is building on banning the Algo and HFT trading altogether. Such a practice puts general investors at a disadvantage as the HFT and Algo trading gives unfair access to powerful traders at the cost of long-term investors. Besides, SEBI has shown inefficiencies in its own ability to supervise such complex HFT trades.

There is seriously a need for an investigation from the regulator itself as it sounds funny when the regulator has asked NSE to investigate its own mistakes.

With such a serious allegations faced by NSE, the most important questions to ask is how can such a company be allowed to solicit funds for itself from public? The question is all the more pertinent because the NSE is supposed to be the first line regulator and would any other private company have been allowed to raise funds publicly if it were facing a similar allegation?