Have the SEBI Board Meetings Stopped Discussing Surveillance Action?
Moneylife Digital Team 13 November 2018
Market regulator Securities and Exchange Board of India (SEBI) has apparently stopped discussing surveillance action during its board meetings since two years. In addition, SEBI also stopped providing names of companies or entities mentioned in the surveillance action report since November 2015. This information came out as a follow-up to a reply received under right to information (RTI). 
SEBI undertakes its market surveillance functions through IMSS (integrated market surveillance system), which went live in 2007. IMSS collects data for suspicious market activities through multiple sources, including its network systems at stock exchanges and depositories. Based on the data, SEBI prepares surveillance action report that is discussed during its board meeting. We have regularly highlighted that market manipulation is rampant in India despite the deployment of expensive and sophisticated IMSS.
To understand the nature and quality of surveillance, Moneylife had filed an RTI query a few months back, requesting information on SEBI’s surveillance statistics and had asked the market regulator about the number of cases its IMSS and Data Warehousing Business Intelligence System (DWBIS) had detected up to 28 February 2018.
We had asked for the dates, agenda and discussions of meetings in which the SEBI board was apprised of functioning of its Surveillance Department (ISD). We also asked for the format of the periodic reports submitted by the surveillance department to the key personnel in charge.
To this, SEBI provided us a link to their website where it stated the details are available. However, for other queries, SEBI said information we sought was ‘strategic in nature’ and of ‘high commercial confidence’ and, hence, cannot be provided.
Using the link provided by SEBI, we searched for more details of the board meetings where matters of surveillance were discussed, and the companies detected by the sophisticated surveillance systems. Our observations were:
1. Discussion on the matters of surveillance relating to the companies detected happened last on 23 September 2016, more than two years ago!
(SEBI Board Meeting agenda for 23 September 2016)
(SEBI Board Meeting agenda for 23 November 2016 has no mention about surveillance action)
2. The SEBI board met around four to six times each year, and matters related to surveillance were discussed at nearly every meeting prior to the meeting on 23 November 2016.
3. The content of these discussions, and the actions taken, were published under the subject head ‘Surveillance Action’ and contained useful data such as name of companies whose shares saw abnormal trading activity and actions taken by SEBI against the promoters.
4. Name of entities found through IMSS, against whom SEBI has taken action used to be publicly shared under item no. 3 ‘significant surveillance measures’ prior to its board meeting on 30 November 2015. 
(Extracts from Surveillance Action as per agenda on SEBI board meeting on 30 November 2015)
5. After this meeting, SEBI started using "This portion has been excised for reasons of confidentiality" to conceal names of the entities on its website. 
(Extracts from Surveillance Action as per agenda on SEBI board meeting on 11 January 2016. Item no3 was about Significant Surveillance Measures)
6. In 2016, the board met five times and the subject of surveillance was discussed in four of those meeting. However, all the details, including action taken and names of companies were now hidden under the garb of confidentiality.
7. In 2017 and 2018, the board met for a total eight times but the subject of ‘Surveillance Action’ was no more part of discussion in any of the meetings.
Earlier in April 2013, Moneylife had filed an RTI requesting similar information from SEBI on its surveillance statistics and cases reported by its sophisticated systems. Their RTI response was “It is informed that the information sought by you is not available with the concerned department of SEBI.” (Read: SEBI says, don’t have info on surveillance system and prosecution!)
This was a shocking disclosure by the regulator who had touted that its surveillance systems will “exploit the power of modern technology in terms of computation and speed of data analysis” and “host pattern recognition algorithms” to crack insider trading.
We then filed our first appeal before the First Appellate Authority (FAA) at SEBI. In the appeal, we requested the FAA to direct the PIO to forward the RTI application to the concerned department that has the information. The FAA, however, rejected the first appeal. (Read: Now, SEBI says it has no information on surveillance either!. Meanwhile, insider trading and market manipulation continues unabated. Even a high-profile deal of Reliance Industries taking over Hathaway and DEN Networks was openly exploited by insiders.
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