SEBI directs BSE to allow inspection of files under RTI; stock exchange disregards directive a second time
Shukti Sarma 21 July 2011

Yogesh Mehta, a former member broker, has for over three years been demanding information with respect to market making by the BSE. He says this resulted in a cost of nearly Rs90 crore and benefitted just a handful. The stock exchange will not cooperate, saying that it is not a public body and that the information is confidential

Both the National Stock Exchange (NSE) and he Bombay Stock Exchange (BSE) have been adamant about their stance on the Right to Information Act and have resisted the attempts by activists to get information. However, in a recent case, the public information officer at the Securities and Exchange Board of India (SEBI) has directed the BSE to allow an RTI applicant to inspect files. Even as the BSE continues to try its best to obstruct the move, activists believe this is a good start.

The appellate authority at SEBI has issued the same directive twice, in favour of the applicant seeking documents relevant to the BSE's market-making activities. But the BSE denies being a 'public authority' subject to the RTI and refuses to see any public interest in the matter.

Describing the documents sought as 'confidential', the BSE replied to one of SEBI's letters saying, "The BSE has consistently been of the view that it is not a public authority. Disclosure of such information shall cause serious harm, injury and prejudice to the interest of BSE, which does not outweigh any public interests in any matter."

SEBI had slapped BSE with a show-cause notice in November 2009, for engaging in market making without acquiring approvals from the regulator. Market making is artificially creating volumes in the derivatives segment, which infuses liquidity. Market makers quote both 'buy' and 'sell' for a financial instrument or commodity, hoping to make a profit on the trade.

Yogesh Mehta, a former member broker of the BSE, had filed a complaint against the BSE over market making in 2008. According to Mr Mehta, the BSE's stint with market making cost the bourse Rs85crore-Rs90 crore, and he alleged that only a handful of persons profited from the process.

After SEBI hauled up the BSE, Mr Mehta filed an RTI application with the market regulator in January 2011, seeking documents relevant to this matter. SEBI directed the BSE to provide the documents, but the BSE refused to see any 'public interest' in this matter and refused to comply with the order.

The BSE said it was not a 'public authority' and went on to outline the duty of the principal information officer (PIO) of SEBI, saying, "The PIO of SEBI is required to grant information which is available to him. Procuring the information sought by the applicant and then making it available is not envisaged under the RTI Act."

Unconvinced with the BSE's reply, Mr Mehta appealed to SEBI again. In an order dated 1 March 2011, Prashant Saran, in the chair of the appellate authority, directed the information officer to get the files from BSE and allow the appellant to inspect the files. "If an applicant keeps demanding inspection of documents, it is better for the respondent to allow inspection… to avoid appeals alleging that not everything was disclosed," he said.

A sulking public information officer then allowed the inspection, but BSE refused to disclose information related to the third party, that is the BSE in this matter between Mr Mehta and SEBI. Mr Mehta wrote to SEBI alleging that the BSE was uncooperative and that he was being provided information in a piecemeal fashion.

The BSE then filed an appeal with the Central Information Commission (CIC), challenging the order passed by Mr Saran, and thus, Mr Mehta's request for inspection of all files was dismissed.

Mr Mehta again wrote to SEBI, citing several court rulings in disparate cases, which said that mere filing of appeal does not amount to a 'stay', without a formal prohibitory order, requesting for spot inspection of files.

Though the appellate authority observed that the precedents cited by Mr Mehta did not apply to the present case, it directed the information officer again 'to provide whatever information had already been offered, as well as any other information… other than the third party information under consideration of the honourable CIC… free of cost within 15 working days." This order was issued on 30th June.

But BSE is taking its time and has not reverted to Mr Mehta on this. "They have not said anything about granting inspection, though much time has passed," Mr Mehta said. "I will wait for a few more days, and then I will go for a second appeal in Delhi."

Clearly, the fight isn't over yet. But SEBI directive in favour of the applicant has opened up a new field, which gives the RTI activists a reason to hope.

sathya cumaran
1 decade ago
i have been cheated by IIFL for which nse bse and sebi are party to it tomy unofficial source the trade had been unofficially done to extent of rs5000 crore and all the accounts of the stock broking firms are fudged which i am going to disclose it in media and also wikileaks site as most corrupt organisation in india
suresh soni
1 decade ago
(1) It is good news / information to RTI activists, that mere filing of Appeal before the Central Information Commission, (CIC), the institution like the Bombay Stock Exchange Ltd. (BSE) cannot deny the required information to the RTI applicants, just that BSE have filed appeal before CIC. It is the experience of the RTI applicants that NSE and BSE and many more institutions, who want to hide their wrong doing, are denying the information to applicants. Forget about RTI Act, 2005, to take action against BSE or NSE, even SEBI has failed to take actions under its SEBI Act and other powers given to SEBI under SC(R)A Act, to take actions when their wrong doing is brought to SEBI’s notice.

(2) Not only mere filing of Appeal before CIC, the information cannot be denied, even Central Public Information Officers (CPIO) and NSE, BSE also can not deny the information to RTI applicants saying that the matter is sub judice and thereby wrongly taking advantage of section 8 of RTI Act. Here also CPIO, NSE, BSE cannot deny the information under section 8, just that the matter is sub judice. There must be PROHIBITORY Order from the competent court, and which amounts to contempt of Court’s orders.

(3) It seems that there is misunderstanding in reporting this good article by Moneylife about denying information by BSE. SEBI’s appellate authority cannot direct BSE to give information to Applicants. The only correct way under RTI Act, is that the 1st Appellate Authority of SEBI, can ask the CPIO of SEBI to get the information from NSE or BSE and then provide the information to applicant.

(4) My suggestion to Mr. Yogesh Mehta is that he should file (1) appeal before the CIC (i) for not giving information by CPIO of SEBI, to Mr. Mehta, (ii) but he should make further appeal to impose the Penalty on CPIO-SEBI, as the 1st Appellate Authority have asked CPIO to provide the information FREE of cost, as there is delay in giving information to him. (2) Mr. Mehta should file complaint to CIC for metal torture and unnecessary delaying tactise of giving the information for last 3 years.
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