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.
The initiative from ASCI will go a long way in getting seriously offending ads removed immediately before they cause any damage to the consumers and society in general
Advertisements which breach the ASCI (Advertising Standards Council of India) code either by being grave obscene, indecent, vulgar or which are against public interest will now have to be withdrawn immediately pending decision of its Consumer Complaint Council (CCC). ASCI has recently amended its Articles of Association to provide for Suspension Pending Investigation. This is similar to the codes of some of the other SROs like the Advertising Standards Authority of the UK. The new Article on Suspension pending Investigation states as follows:
“In exceptional circumstances, when it appears prima facie that an advertisement is in serious breach of the Code and it’s continued transmission on/ through/ by any medium causes or has the effect of causing public harm and/or injury or its continuation is against public interest, then ASCI would, pending investigation and decision by CCC, forthwith require the advertiser/ the advertising agency/ the media buying agency and the media concerned to immediately suspend the release of advertisement.
In the event of suspension of any advertisement in the manner, the CCC shall at the earliest and not later than 30 days from the date of the suspension, adjudicate whether or not the advertisement is in breach of the Code and pass appropriate order accordingly after giving a reasonable opportunity to hear to the advertiser whose advertisement has been suspended. This decision of the suspension is to be taken by the chairman (or, in his absence, the vice-chairman) of ASCI, in consultation with two members of the CCC.”
Commenting on this initiative Arvind Sharma, ASCI chairman said, “Suspension Pending Investigation is an important landmark for ASCI. It will ensure immediate action against advertisements that are clearly seen as against public interest. This initiative will go a long way in getting seriously offending ads removed immediately before they cause any damage to the consumers and society in general. We expect the advertising sector consisting of advertisers, ad agencies and media to support this very important initiative wholeheartedly to protect the interests of Indian consumers and general public.”
Advertising Standards Council of India (ASCI) is an industry body set up to voluntarily self-regulate advertising content. ASCI & its Consumer Complaints Council (CCC) deal with complaints received from consumers, industry and NAMS, against advertisements which are considered as false, misleading, indecent, illegal, leading to unsafe practices, or unfair to competition, and are consequently in contravention of the ASCI Code and Guidelines for Self-Regulation in Advertising. ASCI has recently taken other initiatives to speed up its decision making process.
ASCI has also introduced the Fast Track Complaint Redressal process which will provide decisions related to the intra industry complaints within seven days.
The governor also expressed reservations on the recommendations of the Financial Sector Legislative Reforms Commission, which calls for making the FSDC a statutory body to ensure financial stability
Reserve Bank of India (RBI) governor D Subbarao today said the Financial Stability and Development Council (FSDC) should act only as a coordinator between financial regulators for ensuring financial sector stability.
“There should be a coordination body such as the FSDC, but the coordination body should be just that—a coordination body which will have more importance during a crisis time—but in normal times, will be at a low level equilibrium,” the governor said.
Subbarao also expressed reservations on the recommendations of the Financial Sector Legislative Reforms Commission, which calls for making the FSDC a statutory body to ensure financial stability and have a board headed by the finance minister to oversee the same.
Under the present FSDC arrangement, the RBI governor is a chairman of a sub-committee as the overall head is the finance minister.
“In the Reserve Bank, we have some reservations about that sort of an arrangement. In particular, the concern is that the responsibility for financial stability can be given to a committee rather than to an institution,” Subbarao told a banking summit organised by the Indian Merchants Chamber (IMC) in Mumbai.
The FSLRC was headed by retired Supreme Court judge BN Srikrishna and submitted his report in March.
The report called for a total overhaul of the existing financial system by merging the oversight functions of market, commodity, insurance and pension regulators.
“By the year 2020-25, we hope to achieve $13-$14 trillion economy. An ambition cannot be achieved unless there are steps taken towards it. Therefore, you need something that is drastic, something that is total overhaul of the existing financial system,” Srikrishna had said in his report.