Sucheta Dalal :Complaints redressal: SEBI’s high cost experiment
Sucheta Dalal

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Complaints redressal: SEBI’s high cost experiment  

March 10, 2011

A new tech-based system has been announced. What happened to the old ones?

Sucheta Dalal

A flurry of pro-investor announcements by the Securities and Exchange Board of India (SEBI) in the last few days of chairman CB Bhave’s tenure are most welcome, even if they raise a few questions. One of the measures is SCORES (SEBI complaints redressal system), a “web-based centralised system for speedy redressal of these grievances.” Reports suggest that it will have a centralised database with online access to action taken. But then, a web-based grievance registration mechanism, which gave out ‘tracking numbers’, already exists. While earlier chairmen had insisted that SEBI has an excellent grievance redressal record, this is the first tacit admission that it wasn’t quite working; complaints were numbered but vanished into various departments. We have no idea why it has taken 20 years to put in place a centralised complaint mechanism, but we now know that SEBI has received 2.7 million complaints since inception even as India’s investor population has dwindled from 20 million to 8 million.

The SEBI chief awarded his perennial favourite, TCS Ltd, a data warehousing and business intelligence system (DWBIS) project, which will “exploit the power of modern technology in terms of computation and speed of data analysis” to beef up its investigation process. In time, it will also “host pattern recognition algorithms” to crack insider trading. Excellent. But SEBI makes no mention of two important issues. How much will the new system cost? And how is it different from the expensive and much-touted IMSS (integrated market surveillance system) purchased by SEBI’s former chairman M Damodaran in 2006 through HCL and an Australian firm? The IMSS was to integrate data from various sources including bourses, depositories and clearing corporations into a single surveillance system and detect unusual trading patterns to generate alerts on manipulation, insider trading and other frauds. Does it mean that the IMSS failed? How will TCS’s DWBIS be better? SEBI is silent on this crucial issue.

Another database, which is very important to investors, has not made much progress even a year after SEBI decided to abandon electronic data information filing and retrieval system (EDIFAR), its half-baked statutory reporting system to opt for CorpFiling, which is being set up by the two national bourses. Hopefully, the new announcements by SEBI will work better than CorpFiling and the IMSS.

(This report was first published in Moneylife magazine, in the edition dated 10 March 2011, that was available on the newsstands on 24 February 2011.)

-- Sucheta Dalal