Regulations
Rot inside SEBI: Regulator collects call data of 2,327 subscribers without authorisation

The market regulator routinely collects call data of individuals it is investigating. It took the persistent efforts of an RTI activist to ferret out the fact that SEBI had collected records of a massive 2,327 subscribers, although it is legally not authorised to do so

The Securities and Exchange Board of India's (SEBI) celebrated investigation into the Pyramid Saimira scam was the starting point of the regulator seeking call records of people it is investigating.

At a time when industrialist Ratan Tata has approached the Supreme Court (SC) demanding protection of privacy and when the government has admitted that it is duty bound to protect conversations obtained through phone tapping, it is pertinent to know that government agencies such as SEBI have been routinely demanding call data without authorisation. Worse, most telecom operators have been supplying information without even knowing the facts.

In the landmark case of the People's Union for Civil Liberties versus the government, the SC ensured that the Department of Telecommunications (DoT) explicitly designate the agencies that can obtain telephone data. This includes the director general (DG) of police or commissioner of police at the state level and eight national agencies-the Intelligence Bureau, DG-Narcotics Control Bureau, DG-Directorate of Enforcement (ED), DG-Central Economic Intelligence Bureau, DG-Directorate of Revenue Intelligence, Director of Central Bureau of Investigation (CBI), DG-National Investigation Agency (NIA), Member (Investigation)-Central Board of Direct Taxes and Directorate of Signal Intelligence, Ministry of Defence (for J&K, North East and Assam areas only). SEBI is not on the list and has been trying hard to be included.

The DoT, in a letter, dated 10 December 2009 (a copy of which is available with Moneylife), clearly said that SEBI is not an authorised enforcement agency for intercepting or monitoring calls. P Chidambaram too had turned down SEBI's request when he was the finance minister.

Yet, in the Pyramid Saimira case, the market regulator sought records of several entities only to learn, long after its first report, that a SEBI manager had forged a letter (at the behest of a former promoter of the company), which caused wild fluctuations in the stock price and triggered a massive investigation that has killed the company.

The story gets even more curious when a Right to Information (RTI) activist filed a query in August 2010 seeking information on the total number of telephone/mobile connections in respect of which information was sought from service providers. SEBI's first reaction was to reject the request on the grounds that it would hamper ongoing investigations.

The RTI activist filed an appeal in November 2010, saying that he had not asked for specifics, but only the total number of cases in which information had been sought. When the appeal was allowed, SEBI responded on 7 December 2010 saying that it has sought call records for a total of 13 numbers, of which call records for five had not been received from the service provider.

Refusing to believe that the number was so tiny, the RTI activist filed a second query on 20th December. This time he asked for file notings/green notes of various SEBI divisions dealing with the issue.

All of a sudden, on 21st December, SEBI sent another reply giving point-wise additional information, which says it has been collecting call record data of about 2,327 subscribers. In effect, just 14 days later, the market regulator reported that there were not 13 but 2,327 subscribers whose call records had been sought. Of these, 1,774 records were sought by simply writing a letter to telecom operators. We learn that SEBI often seeks information without even initiating a formal investigation. In addition, it has authorised fairly junior officials to deal with the telecom companies.

This raises a lot of questions. Giving wrong information under the RTI Act is a serious offence. In this case, SEBI provided the information in a letter dated 21st December saying that "in continuance" of its earlier letter with false and incomplete data (that it sought only 13 telephone records), it was providing "point-wise additional information" with regard to the query. Would this information have been provided if the RTI applicant had not filed a follow-on query seeking green notes and file notings? Was SEBI trying to fudge facts? Clearly, the benefit of doubt does not go to the regulator. It also introduces a new element of how the regulator tries to fudge facts to hide the fact that it is seeking unauthorised data.

The questions now is whether the government will legitimise SEBI's actions or stop it from seeking such information.

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COMMENTS

balan

6 years ago

Why does all SEBI IT contracts go to TCS? A clue: before the current chairman is gone, SEBI has signed a "business intelligence" contract with TCS!

REPLY

Ajay Desai

In Reply to balan 6 years ago

Pvidya and XY. No comments on this? Or are you part of the gravy train?

Nagesh KiniFCA

6 years ago

SEBI has no business to debar professionals like advocates, tomorrow it may be CAs and CSs. They are rightly likened to village thanedars.
The so-called Settlement with the ADAG is in deed a very small penalty for a major misdemenour.
What happens to the perpetrators of the current bear cartels - will they also be let off after a minor rasp on the knuckles?
This is a watchdog that can neither bark nor bite. Will the new chief put more teeth in this toothless tiger?

MDT

6 years ago

Moneylife tries hard to get all sides of a story, especially the regulator’s views. SEBI officials however are not open to answering any queries; occasionally they tell us that they are ‘looking into’ an issue. The utilisation of investor protection funds with stock exchanges is an example. Given this, we are surprised at SEBI officials posting reactions to our reports anonymously. The IP address of comments by Vidya and XY show that it is from SEBI Bhavan. This is not the first time this has happened.
We urge the regulator to be more transparent, answer our queries openly and accept contrary points of view. This is important to work towards a safe and healthy capital market.

REPLY

bhave

In Reply to MDT 6 years ago

This is absolutely shocking. The headmaster/nitpicker/grammarian is a SEBI official !! What cheek. Totally shameless! What a waste of public money!

Ajay Desai

In Reply to bhave 6 years ago

Thanks MDT for enlightening us.
Sebi officials sitting and posting here anonymously? This is totally scandalous!
XY: "I think Moneylife should employ people who can atleast construct grammatically correct sentences."
And Sebi should employ people who are crooks and are in bed with market manipulators? How nice. I hope XY stops lecturing now

abhay

6 years ago

About interception and CDR, the whole debate is pointless. The DOT has clearly indicated that SEBI can not even seek CDR details from telecom companies. Once that is settled, what was PVidya trying to debate is not clear. But than SEBI exceeding its territory and jurisdictionhas been quite common in last couple of years.

Sample the following-
1. SEBI debarred an advocate from practicing before its officers first through an internal note and then through an order under SEBI act. This inspite of clear Legal position settled even by Supreme Court that only Bar Councils have jurisdiction in this matter. But then expecting knowledge of law from PVidyas and others who want to run SEBI like it were a Police thana in Rural Maharashtra is probably an insult to their "worthiness". Needless to say, as usual, SEBI got a big slap from SAT in this matter.
2. SEBI has been administering the consent process in a way that has made HPC a mere rubber stamp.
3. SEBI, on a complaint filed by one of its own ED's wife, decided in total disregard to its own position when it comes to interest rate futures and MF Gold funds, that it would regulate ULIPs

Fact is that for the last couple of years SEBI has totally forgotten that there is something called Rule of Law.

REPLY

abhay

In Reply to abhay 6 years ago

Dear PVidya, Rekha and XY

Want to join a discussion purely on merits on the "rights and wrongs" of SEBI's actions in last couple of years??

i am sure, you are aware that after the 11B exparte order (much celebrated, because of your media skills) in the case of Pyramid Saimira you have not been able to justify the order in majority of cases. You are keeping totally silent, not allowing the people against whom the exparte order was passed, the justified relief. What are you afraid of? That people will know the real quality of your work? Let me assure you everybody inside and outside SEBI, except you, knows the REAL quality or merit of SEBI order in that matter.

I am sure you are aware that NK is not only trading, but is thriving>>>>>

P V Subrahmanyam

6 years ago

this not only the case. SEBI is behaving that it is above the law of this land. Ours is a multi ligual country, where in the names in regianal laguages are spelt by different people in different ways. Small corrections in maes for opening of account, or investing in mutual funds are denined. its a general rule that spelling mistakes in proper nowns are to be accepted. and the evidence act says any thing given on oath has to be considered. but sebi wants the original records to be changed. it is very difficult to change the records of govt. where in the present case the sebi itself could not divulge the truth till it is in a fix.

Balan

6 years ago

Vidya,
Nicely erased from public memory

Sebi officer in bribe net
http://www.telegraphindia.com/1100202/js...

Nagesh KiniFCA

6 years ago

SEBI may not necessarily be corrupt. What we do not want is a honest idiot Regulator. It is time it takes constructive measure.

XY

6 years ago

It's normal for certain types of people to hate SEBI. Never heard of criminals liking policemen! ;-)

REPLY

Abraham

In Reply to XY 6 years ago

I have. Criminals love corrupt policmen ;-)

bhave

In Reply to Abraham 6 years ago

Abraham, where is your full stop? Please ensure correct grammar. We have an ace grammarian here who ignores substance and is interested in form. He is also looking for comic relief. So humour him Ok?

MADHUKAR SHETH

6 years ago

Interesting battle between MBT & Vidya ( a SEBI girl, as alleged ?). While MBT/MoneyLife is doing good service to society, I am with SEBI even if they are overstepping their authority in collecting data. I am presuming that they do this to prevent wrong doing. I hope they dont listen to talks of big traders/brokers/FII only to get a TRADING TIP for their officers.
Somebody alleged "lining pockets of SEBI officers", but I think SEBI is reasonably clean organisation and far less corrupt or rather least corrupt amongst most govt organisations.
We can pardon some short comings of SEBI, looking at great improvements in the markets brought by SEBI.

Unlike Vidya, I am not working for SEBI. I have fought SEBI for their misjudgements against me in past. I was in the rally against SEBI in 1992 (when SEBI was formed) from BSE bldg to SEBI office at Nariman Point.
While BSE was king in 1990, arrival of SEBI in 1992 took away its powers and arrival of NSE in 1994 took away its riches. Most of us hate SEBI, but still, SEBI is the best thing that has happened to securities markets.

REPLY

Sahoo

In Reply to MADHUKAR SHETH 6 years ago

So, you were wrong in 1992 (rally against Sebi) and right now?

asif sayeed

In Reply to MADHUKAR SHETH 6 years ago

Funny how you should extrapolate. SEBI has been around for 20 years and there is a slow degeneration process.
Nobody says SEBI should not collect data to go after wrong doers, but when government agencies use powers that are not specifically sanctioned, they become arbitrary. All govt agencies must follow a set of rules. Otherwise you create a system where an IAS couple has over Rs 320 crore or a collector in Mumbai has wealth of Rs 1000 crore.
lets not be naive about misuse of powers.

Also if SEBI was so honest why is there such a stunning silence about Joseph, their manager who was caught hand-in-glove with Nirmal kotecha?
Do we want that guy to get hold of phone records? How will SEBI assure us that someone like him wont use it to blackmail people?
If you don't know what I am talking about read
http://www.suchetadalal.com/?id=75a8cc37...

XY

6 years ago

"respond to this statements"
"Do you or does you people know"
"Waiting for you answer"
" whatever you is your name"


I think Moneylife should employ people who can atleast construct grammatically correct sentences.

REPLY

bhave

In Reply to XY 6 years ago

dear headmaster and chief nitpicker,
these messages, like SMS, are hurriedly written.
but who can teach you that. you the king of finding faults of others. congrats for your enlightening lost

XY

In Reply to bhave 6 years ago

"your enlightening lost"

Bhave, this sentence doesn't even make sense. I see nothing wrong in wanting certain basic standards of linguistic usage to be maintained. But you've begun creating sentences that are bereft of meaning. I suggest you go back to school. Thanks for making me laugh, anyway. You're good for comic relief.

bhave

In Reply to XY 6 years ago

good that i have been of some use.
and you must be a government official (with sebi?) with a lot of time on hands and using your hands in the best possible way ;-)

Ajay Desai

In Reply to XY 6 years ago

XY (what happened to the Z?. Lost in translation?)
please keep your stuffy "linguistic standards" or whatever crap at home. you can clearly see people are posting within a small text box and there are bound to be mistakes. take your "grammar" and shove it. oh my! look at my capitalisation! XY will come back thick and fast now. webmaster, please shut up this stuffed shirt

Angelo Extross

6 years ago

The first action that should follow is a heavy detterent penalty be imposed on the concerned officer from SEBI who gave wrong information under RTI Act. The concerned RTI Activist must make an application to the Information Commissioner and specifically request that the fine be deducted in suitable installments from the salary and that a noting be made on his personal file. Only then will it be a triumph of the RTI Act.

Nagesh KiniFCA

6 years ago

SEBI like IRDA is no authorised agency to bull doze telecom cos to provide info. when it has many better things to do in its regulatory jurisdiction.

VIDYA

6 years ago

Phone tapping and collecting telephonic records are two different things. The latter is only collecting the data about whom the person concerned called and time of call. Content of the conversation is not revealed by such data. This type of data is used to establish synchronized trades, mostly in liquid scrips and for establishing the relationship between the persons dealing in securities. In my opinion the authors are trying to mislead the readers by referring to Mr. Ratan Tata's case and collecting data relating to telephonic calls of the suspected fraudster in the same paragraph. Collection of such data by SEBI can't be stretched to be interpreted as an infringement of right of privacy. Again the law mentioned by the author is actually about interception of call/message and not about collecting telephonic records such as who called the person at what time and whom did the suspected person call. The authors should refrain from writing such manipulative articles and realise their duty towards the readers.

REPLY

abhay

In Reply to VIDYA 6 years ago

About interception and CDR, the whole debate is pointless. The DOT has clearly indicated that SEBI can NOT even seek CDR details from telecom companies. Once that is settled, what is PVidya trying to debate is not clear. But than SEBI exceeding its territory and jurisdictionhas been quite common in last couple of years.

Rakesh

In Reply to VIDYA 6 years ago

One simple query: why was this clean organisation, the messiah of the small investor lying to a simple RTI query? Please refer to
"All of a sudden, on 21st December, SEBI sent another reply giving point-wise additional information, which says it has been collecting call record data of about 2,327 subscribers. "

MDT

In Reply to VIDYA 6 years ago

Vidya...or is it your real name. Whatever it is, we for sure know that you work for SEBI. Have you posted this comment as official representative of SEBI? If yes, then pls respond to this statements...
"The SC ensured that the Department of Telecommunications (DoT) explicitly designate the agencies that can obtain telephone data. The DoT, in a letter, dated 10 December 2009 (a copy of which is available with Moneylife), clearly said that SEBI is not an authorised enforcement agency for intercepting or monitoring calls."
Do you or does you people know that seeking CDR or tapping a phone without any authority is offense under the Telecom Act? And by giving a clarification are you admitting your crime?Waiting for you answer....

Ram

In Reply to MDT 6 years ago

MDT, You have raised one pertinent issue here.
If Supreme court has clearly stated that SEBI is not an authorised enforcement agency to intercept or monitor calls. Let us assume SEBI officials are not intercepting or monitoring calls.
Now the question is are SEBI officials authorised to ask for call data from Telcos ?
Are Telcos authorised to provide info on call data or Logs to SEBI ? Is there a violation of some Law here ?.

I must confess there is an element of truth in what Vidya says as there is a big difference between intercepting and monitoring calls as in Nira Radia case and simply getting printouts of call logs.

abhay

In Reply to Ram 6 years ago

What if PVidya is misleading by trying to portray that SEBI can seek CDR details, where as the truth is that DOT has clearly stated that SEBI is not even authorised to seek call Logs !!!

Vidya

In Reply to MDT 6 years ago

MDT, it is painfully apparent that you have not applied your mind to my statement. Intercepting and monitoring calls is different from collecting data regarding call timings and persons to whom calls were made. Unless you perceive this distinction, you will fail to appreciate my argument.

P.S. It is somewhat hypocritical for a person concealing his own identity to ask another person about their identity. Nevertheless, the focus should be on the content of arguments and not on their source. For your satisfaction, let me state that I do not work for SEBI.

MDT

In Reply to Vidya 6 years ago

Vidya....or whatever you is your name...MDT stands from Moneylife Digital Team and we repeat and confirm, according to our information, you indeed work for SEBI. So dont tell lies. Do you know the difference between CDR and tapping? If no, then ask your team what they had used as proof in the Pyramid Saimira case.

GS

6 years ago

People always suspected that the regulator is not serious about enforcing the law and can be managed by lining the officers' pockets.

The long drawn out processes, the abysmal number of convications, the high number of appeals lost at SAT stage, all point to the low quality of litigation - deliberate - cynics say - to provide easy escape route to those willing to pay.

If given the right to tap phone lines, it would be definitely useful to trap operators, circular trading and front running and insider trading at the same time giving multiple sources of income to its officers.

The retail investor would not benefit in either case.

Babubhai Vaghela

6 years ago

I see no reason why Chairman SEBI should not be sacked for criminal act of invasion of privacy by abusing positional power.

REPLY

Rakesh

In Reply to Babubhai Vaghela 6 years ago

Why should he be when the entire media thinks he is honest, straight and a messiah of the investors!

Ram

In Reply to Rakesh 6 years ago

Rakesh, the entire nation including the media also believes that our PM is honest,straight and a messiah of India. How do we solve this puzzle?

India to harvest record wheat, pulses and cotton crop

The higher production would be achieved despite significant crop damage due to drought in Bihar, Jharkhand, Orissa and West Bengal and the effects of cyclone, unseasonal rains and severe cold wave and frost in several parts of the country

New Delhi: Setting fresh record in wheat and pulses production, India's overall foodgrain output in the 2010-11 crop year is expected to bounce back after a drought year with a growth of 6% at 232.07 million tonnes (MT), reports PTI.

"We are likely to achieve record production of wheat (81.47 MT), pulses (16.51 MT) and cotton (33.9 million bales of 170 kg each) this year," agriculture minister Sharad Pawar told reporters after announcing the second advance estimate of foodgrain production for 2010-11 crop year.

Mr Pawar said foodgrain production is likely to increase to 232.07 MT against 218.11 MT last year. This is only marginally below the record production of 234.47 MT in 2008-09.

Commenting on the bumper production, US think-tank IFPRI's Asia director Ashok Gulati said, "There is no inflation in wheat and rice. Pulses production is up and this year we will not bear the brunt of high prices as we faced in 2009. So some relief will be there in the coming days."

Mr Pawar noted that the higher production would be achieved despite significant crop damage due to drought in Bihar, Jharkhand, Orissa and West Bengal and the effects of cyclone, unseasonal rains and severe cold wave and frost in several parts of the country.

"It was our desire to reach 4% growth, but there was drought last year. However, we have reached 5.4% growth in GDP (in agri and allied sector) because of efforts of the farming community, extension workers and scientists," the minister said.

In the foodgrain basket, rice output is estimated to rise at 94.01 MT in 2010-11 from 89.09 MT last year while wheat production is likely to touch fresh record at 81.47 MT against 80.8 MT.

As for pulses, it is also seen at record 16.51 MT against 14.66 MT while coarse cereals output is set to increase to 40.08 MT against 33.55 MT, the second estimate data showed.

"This year, performance of farmers is exceptional. Pulses farmers have taken up good crop," Mr Pawar said while attributing bumper crop production to adequate and timely supply of farm inputs and focused intervention through various government schemes.

Among non-food crops, oilseeds production is estimated to rise to 27.84 MT in 2010-11 against 24.88 MT last year and cotton output is likely to touch a record 33.9 million bales, against 24.2 million bales.

Sugarcane output is also expected to increase to 336.69 MT against 292.3 MT in the review period, the second estimate showed.

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Govt spells out measures to retrieve black money

The government also informed the Supreme Court that it has completed negotiations for Tax Information Exchange Agreement (TIEA) with 10 countries where the money is believed to have been stashed

New Delhi: Black money parked in tax havens abroad will be taxable income under the Direct Taxes Code (DTC) Bill, the Centre told the Supreme Court today, spelling out a host of measures to retrieve it.

The government also informed the apex court that it has completed negotiations for Tax Information Exchange Agreement (TIEA) with 10 countries where the money is believed to have been stashed, reports PTI.

The ten countries are Bahamas, Bermuda, British Virgin Island, Isle of Man, Cayman Island, British island of Jersey, Monaco, St Kitts and Nevis, Argentina and Marshall Island.

It said Cabinet approval has been granted in relation to eight of these agreements.

"It is submitted that the central government has proposed new provisions for unearthing black money in the DTC Bill by defining taxable assets as inclusive of the deposits in banks located outside India in case of individuals and such bank deposits not recorded in the books of account in case of others," an additional affidavit filed by the ministry of finance said.

The affidavit comes in the wake of searching questions posed by a bench of justices B Sudershan Reddy and  S Nijjar on a public interest litigation (PIL) filed by eminent jurist Ram Jethmalani and others, seeking retrieval of black money stashed in banks abroad.

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