The SEBI Employees’ Association (SEA) has expressed concern over recent raids by Central Bureau of Investigation (CBI) on residences of three of its members. "...These selective examinations are extremely demoralising for the entire organisation and will result in creating a fear psychosis," the Association said in a letter sent to SEBI Chairman on 20 September 2016.
Referring to a letter sent by the Association on 14 December 2015, the SEA, in its latest letter to Chairman of Securities and Exchange Board of India (SEBI), says, "While SEA is not aware of the action taken by SEBI in response to the letter, the development of selective searches is shocking and disturbing because this matter is about six-eight years old and involves decision making at the highest level in SEBI. While we understand that the truth must come out and law needs to take its own course, what is shocking is these searches have been carried out only on SEBI officials to the exclusion of approving authorities/higher ups who were associated in decision making. It may be recalled that one of the officials who was searched was given citation by the President of India of best employee award by the Union Ministry of Social Justice and is also visually challenged.
The CBI on Tuesday arrested Jignesh Shah, founder-owner of Financial Technologies of India Ltd and carried out raids at nine locations including his offices and home. According to media reports, the move came after CBI searches at nine locations, including the premises of Shah, FTIL, MCX, senior SEBI officials --Executive Director Muralidhar Rao, DGM Rajesh Dangeti and AGM Vishakha More-- and a former Executive Director of SEBI, JN Gupta, in connection with the case registered two years ago.
In its previous letter too, the SEBI Employees’ Association had expressed their concern at the large number of officials being summoned by various investigation agencies such as CBI, the income-tax department and the economic offences wing to record their views on various decisions taken in the course of their work. The letter stated that 70 out of SEBI’s 652 officials had been summoned—this had doubled in the recent past.
While it is true that all officials should be accountable and open to investigation of dubious actions, organisations such as the Reserve Bank of India (RBI) have evolved a system of dealing with inquiries. Income-tax officers are protected by their statute when it comes to work-related decisions. Both organisations have evolved an informal protocol of sorts, where investigation agencies, such as CBI or the police, will visit their offices for routine inquiries and summon officials only if a ‘preliminary enquiry’ is formally opened.
SEBI has not evolved any such mechanism to support its officials, says the Association. This is partly due to callousness and partly because of the machinations of SEBI’s own top brass.
Ironically, the officers’ protest comes at a time when several of SEBI’s senior-most officers have been ‘examined’ by CBI, not only in the Bank of Rajasthan matter, but also the Saradha chit fund scam and the MCX (Multi Commodity Exchange of India) group. Moreover, allegations of corruption had dogged the organisation right from the early 1990s and, yet, no official has ever been held accountable, despite two massive securities scams, a permanently damaged primary capital market and the exodus of retail investors.
However, SEBI officers are not arguing for immunity: they say that indiscriminate summons, humiliation and questioning by other agencies at the fact-finding stage, is causing widespread demoralisation, especially when the organisation offers no support. All this points to a dysfunctional organisation which needs a complete overhaul of its structure, appointments and human resources policy, in order to make it an effective regulator.