In your interest.
Online Personal Finance Magazine
No beating about the bush.
The capital market regulator has spent crores of rupees, twice, over sophisticated real time market surveillance systems to track stock price manipulation. Yet, it says it has no statistics on the surveillance!
In a shocking disclosure, the Securities Exchange Board of India (SEBI) says that it does not have information relating to its market surveillance system! This was in response to an RTI filed by Moneylife. Moneylife had filed an RTI on 9 April 2013, requesting information on SEBI’s surveillance statistics and had asked SEBI how many suspicious cases its sophisticated Integrated Market Surveillance System (IMSS) and Data Warehousing Business Intelligence System (DWBIS) had detected till 31 March 2013. Our questions were simple:
Well, it seems the regulator did not have such information with it! SEBI vide its reply no CPIO/AKS/AJ/325-2013/10853, stated, “It is informed that the information sought by you is not available with the concerned department of SEBI.” How is this even possible? If the surveillance department does not have such information, then who has it? Who is really in charge of monitoring the data captured by the surveillance department?
SEBI has spent over a whopping Rs50 crore in the so called “state-of-the-art” surveillance systems: IMSS and the more modern DWBIS. Earlier, SEBI had touted that the DWBIS project 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. Despite all this hype and talk and the enormous amount of money spent, stock manipulation still continues, right under SEBI’s nose.
Even now, Moneylife routinely comes across companies, mostly with poor fundamentals and past track record of transgressions, whose share prices brazenly manipulated, in no time, putting minority shareholders at a disadvantage. For instance, Moneylife wrote that Nucent Estates (Unquoted section of Moneylife issue dated 16 May 2013) went up a whopping 742% from just Rs1.28 to Rs10.78 in just one year. The company had earlier failed to comply with Bombay Stock Exchange (BSE) corporate governance norms. It even changed its name, a common tactic adopted by companies to disguise their past transgressions. Similarly, Kelvin Fincap (Moneylife issue dated 2 May 2013) rose 549% within a year after BSE had revoked its suspension! There are numerous cases which Moneylife has written about. Do check out the Unquoted section of the magazine and website (http://www.moneylife.in/?cx=012932029967637413115%3Aroup7yt0ras&cof=FORID%3A9&ie=UTF-8&q=Unquoted&imageField.x=-1150&imageField.y=-221). You will be alarmed and surprised at the ease of how company share prices can be manipulated. Moneylife even did a cover story on this (which can be accessed here: Stock Manipulation). Even stock exchanges such as National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) do little. So much for SEBI spending huge amount of tax payers’ money on this surveillance system!
Moneylife had found out that 48 staff members are posted in the Integrated Surveillance Department (ISD) of SEBI, which houses the IMSS and DWBIS system, as of 31 March 2013. The IMSS contract value was found out to be Rs20.55 crore, out of which Rs6.52 crore went towards “capital expenditure” between 2007 and 2010. HCL Technologies was the vendor.
Then SEBI adopted another system known as DWBIS, which came into existence from 2010 onwards, and the contract value was found to be Rs34.38 crore and Tata Consultancy Service (TCS) is the new vendor. Out of this amount, over Rs11 crore has gone towards “capital expenditure” in the last two years alone. This is collectively over Rs50 crore of taxpayers’ money.
This is a lot of taxpayers’ money and nobody knows if SEBI is truly looking at cases triggered by the systems, if at all, let alone punishing offenders and compensating minority shareholders. Nobody knows how effective SEBI’s surveillance system is either. It is even more shocking that the surveillance department of SEBI do not have the information with them.
Moneylife has filed a first appeal before the First Appellate Authority at SEBI.