Sucheta Dalal :Caveat emptor
Sucheta Dalal

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Caveat emptor  

Jun 6, 2005

Last week, we pointed out that personal information provided to a plethora of government-mandated databases puts people at risk, in the absence of a Privacy Policy, with clearly enunciated rights, responsibilities and safeguards. Nikhil Ojha ( sent us his blog posting on how banks are already manipulating people to unknowingly sign away their rights. For instance, Standard Chartered Bank, he says, has sought a negative consent from its customers (the letter says ‘‘Non-receipt of any communication from your end by June 10th 2005 will be deemed as acceptance of consent and authorization’’) to share information about their account with ‘other’ parties. It claims that the consent is in accordance of a Reserve Bank circular ‘‘reference no. DBOD No. DL.BC.29/ 20.16.002/ 2002-03 directing all banks operating in India to periodically submit credit information pertaining to their customers to the Credit Information Bureau (India) Ltd. or any other agency authorized by the RBI. Ojha writes, ‘‘In a classic sleight-of-hand, the letter goes on to construct a clause for consent and authorization that goes far beyond what the RBI requires’’ and extends the consent and authorization to suit its own needs and agenda. The clause asks customers to agree to the following: ‘‘Authorize the bank to disclose to Credit Information Bureau (India) Ltd (CIBIL) or any other agency authorized by RBI or such other parties as the Bank shall deem fit’’ (‘the Bank’ is Standard Chartered not the Reserve Bank); ‘‘The Customer(s) also consent and authorizes CIBIL or any such other agency authorized by RBI or such parties as the Bank shall deem fit, to use, process the said information disclosed by the bank in the manner deemed fit by them and to furnish for consideration, the processed information or products thereof prepared by them, to banks/ financial institutions and other credit grantors or registered users, as shall be specified by RBI in this behalf or otherwise’’ (Emphasis provided). Can such a sweeping authorisation be sought by a negative consent? What right does any Bank have to pass on customer data to anybody without specific consent? Shouldn’t customers be made aware of what they are signing away? Will the central bank wake up to such mischief only when the matter finally lands in court?


Scamsters return


No matter how often they are punished, you apparently cannot keep some hard-boiled scamsters from manipulating stocks. Investigations into the Scam of 2000-01 revealed the sordid role played by a number of Kolkata brokers and their massive off-market dealings with Ketan Parekh, who was named the central figure of the Scam by the Joint Parliamentary Committee Report. Kolkata sources report that a part of the cabal that ruined the market in 2001 and bankrupted Unit Trust of India a few years ago is back in action. They are working with a Mumbai operator, who is again funnelling money into illegal trading operations. Interestingly, an industrialist who is on the run from the police and has been barred from the capital market has changed his name to Mittal and is again dabbling in the share market using FIIs as fronts. These scamsters are actively ramping up an airline scrip that the market grapevine links to a minister in the previous government. The scamsters are also emboldened by former minister for law and company affairs Arun Jaitley throwing all probity to the winds and making himself available to defend scamster and defaulter Ketan Parekh. The BJP too has officially defended that action and even dared to justify it as a professional one.


Net trading woes?


Many Internet traders who have complained that their orders were executed at rates other than those they punched in, have now got some relief. Such errors occurred on rare occasions (there have been barely a dozen reported complaints, of which eight were from ICICI Direct and the rest from other Net broking outfits), but tended to be dismissed as punching mistakes by the service providers and bourses. But last week the NSE finally took cognisance of the complaints and asked the brokerage firms to reimburse the affected investors. It also ordered a systems audit to track these errors and report its findings to the bourse. It has also asked the firms to designate a nodal official to deal with the complaints, check their veracity and compensate investors in genuine cases.


Quiet moves


At its recent board meeting, the Securities and Exchange Board of India (SEBI) is understood to have invited Venu Srinivasan (Chairman of TVS Motor Company) to join its board. This slot had remained vacant after Kumar Mangalam Birla’s tenure ended, probably because Birla had found little time to attend the regulator’s meetings. Interestingly, Srinivasan had been invited to be on the board of SEBI’s ambitious ‘‘global securities markets training centre’’ called the National Institute of Securities Markets (NISM) that now seems headed for a drastic scaledown. In fact, SEBI has initiated steps to take over the Indian Institute of Capital Markets (formerly UTI Institute) and expand its scope to meet training needs.


-- Sucheta Dalal