Rot inside SEBI: Regulator collects call data of 2,327 subscribers without authorisation

The market regulator routinely collects call data of individuals it is investigating. It took the persistent efforts of an RTI activist to ferret out the fact that SEBI had collected records of a massive 2,327 subscribers, although it is legally not authorised to do so

The Securities and Exchange Board of India's (SEBI) celebrated investigation into the Pyramid Saimira scam was the starting point of the regulator seeking call records of people it is investigating.

At a time when industrialist Ratan Tata has approached the Supreme Court (SC) demanding protection of privacy and when the government has admitted that it is duty bound to protect conversations obtained through phone tapping, it is pertinent to know that government agencies such as SEBI have been routinely demanding call data without authorisation. Worse, most telecom operators have been supplying information without even knowing the facts.

In the landmark case of the People's Union for Civil Liberties versus the government, the SC ensured that the Department of Telecommunications (DoT) explicitly designate the agencies that can obtain telephone data. This includes the director general (DG) of police or commissioner of police at the state level and eight national agencies-the Intelligence Bureau, DG-Narcotics Control Bureau, DG-Directorate of Enforcement (ED), DG-Central Economic Intelligence Bureau, DG-Directorate of Revenue Intelligence, Director of Central Bureau of Investigation (CBI), DG-National Investigation Agency (NIA), Member (Investigation)-Central Board of Direct Taxes and Directorate of Signal Intelligence, Ministry of Defence (for J&K, North East and Assam areas only). SEBI is not on the list and has been trying hard to be included.

The DoT, in a letter, dated 10 December 2009 (a copy of which is available with Moneylife), clearly said that SEBI is not an authorised enforcement agency for intercepting or monitoring calls. P Chidambaram too had turned down SEBI's request when he was the finance minister.

Yet, in the Pyramid Saimira case, the market regulator sought records of several entities only to learn, long after its first report, that a SEBI manager had forged a letter (at the behest of a former promoter of the company), which caused wild fluctuations in the stock price and triggered a massive investigation that has killed the company.

The story gets even more curious when a Right to Information (RTI) activist filed a query in August 2010 seeking information on the total number of telephone/mobile connections in respect of which information was sought from service providers. SEBI's first reaction was to reject the request on the grounds that it would hamper ongoing investigations.

The RTI activist filed an appeal in November 2010, saying that he had not asked for specifics, but only the total number of cases in which information had been sought. When the appeal was allowed, SEBI responded on 7 December 2010 saying that it has sought call records for a total of 13 numbers, of which call records for five had not been received from the service provider.

Refusing to believe that the number was so tiny, the RTI activist filed a second query on 20th December. This time he asked for file notings/green notes of various SEBI divisions dealing with the issue.

All of a sudden, on 21st December, SEBI sent another reply giving point-wise additional information, which says it has been collecting call record data of about 2,327 subscribers. In effect, just 14 days later, the market regulator reported that there were not 13 but 2,327 subscribers whose call records had been sought. Of these, 1,774 records were sought by simply writing a letter to telecom operators. We learn that SEBI often seeks information without even initiating a formal investigation. In addition, it has authorised fairly junior officials to deal with the telecom companies.

This raises a lot of questions. Giving wrong information under the RTI Act is a serious offence. In this case, SEBI provided the information in a letter dated 21st December saying that "in continuance" of its earlier letter with false and incomplete data (that it sought only 13 telephone records), it was providing "point-wise additional information" with regard to the query. Would this information have been provided if the RTI applicant had not filed a follow-on query seeking green notes and file notings? Was SEBI trying to fudge facts? Clearly, the benefit of doubt does not go to the regulator. It also introduces a new element of how the regulator tries to fudge facts to hide the fact that it is seeking unauthorised data.

The questions now is whether the government will legitimise SEBI's actions or stop it from seeking such information.

Comments
balan
1 decade ago
Why does all SEBI IT contracts go to TCS? A clue: before the current chairman is gone, SEBI has signed a "business intelligence" contract with TCS!
Ajay Desai
Replied to balan comment 1 decade ago
Pvidya and XY. No comments on this? Or are you part of the gravy train?
Nagesh KiniFCA
1 decade ago
SEBI has no business to debar professionals like advocates, tomorrow it may be CAs and CSs. They are rightly likened to village thanedars.
The so-called Settlement with the ADAG is in deed a very small penalty for a major misdemenour.
What happens to the perpetrators of the current bear cartels - will they also be let off after a minor rasp on the knuckles?
This is a watchdog that can neither bark nor bite. Will the new chief put more teeth in this toothless tiger?
MDT
1 decade ago
Moneylife tries hard to get all sides of a story, especially the regulator’s views. SEBI officials however are not open to answering any queries; occasionally they tell us that they are ‘looking into’ an issue. The utilisation of investor protection funds with stock exchanges is an example. Given this, we are surprised at SEBI officials posting reactions to our reports anonymously. The IP address of comments by Vidya and XY show that it is from SEBI Bhavan. This is not the first time this has happened.
We urge the regulator to be more transparent, answer our queries openly and accept contrary points of view. This is important to work towards a safe and healthy capital market.
bhave
Replied to MDT comment 1 decade ago
This is absolutely shocking. The headmaster/nitpicker/grammarian is a SEBI official !! What cheek. Totally shameless! What a waste of public money!
Ajay Desai
Replied to bhave comment 1 decade ago
Thanks MDT for enlightening us.
Sebi officials sitting and posting here anonymously? This is totally scandalous!
XY: "I think Moneylife should employ people who can atleast construct grammatically correct sentences."
And Sebi should employ people who are crooks and are in bed with market manipulators? How nice. I hope XY stops lecturing now
abhay
1 decade ago
About interception and CDR, the whole debate is pointless. The DOT has clearly indicated that SEBI can not even seek CDR details from telecom companies. Once that is settled, what was PVidya trying to debate is not clear. But than SEBI exceeding its territory and jurisdictionhas been quite common in last couple of years.

Sample the following-
1. SEBI debarred an advocate from practicing before its officers first through an internal note and then through an order under SEBI act. This inspite of clear Legal position settled even by Supreme Court that only Bar Councils have jurisdiction in this matter. But then expecting knowledge of law from PVidyas and others who want to run SEBI like it were a Police thana in Rural Maharashtra is probably an insult to their "worthiness". Needless to say, as usual, SEBI got a big slap from SAT in this matter.
2. SEBI has been administering the consent process in a way that has made HPC a mere rubber stamp.
3. SEBI, on a complaint filed by one of its own ED's wife, decided in total disregard to its own position when it comes to interest rate futures and MF Gold funds, that it would regulate ULIPs

Fact is that for the last couple of years SEBI has totally forgotten that there is something called Rule of Law.
abhay
Replied to abhay comment 1 decade ago
Dear PVidya, Rekha and XY

Want to join a discussion purely on merits on the "rights and wrongs" of SEBI's actions in last couple of years??

i am sure, you are aware that after the 11B exparte order (much celebrated, because of your media skills) in the case of Pyramid Saimira you have not been able to justify the order in majority of cases. You are keeping totally silent, not allowing the people against whom the exparte order was passed, the justified relief. What are you afraid of? That people will know the real quality of your work? Let me assure you everybody inside and outside SEBI, except you, knows the REAL quality or merit of SEBI order in that matter.

I am sure you are aware that NK is not only trading, but is thriving>>>>>
P V Subrahmanyam
1 decade ago
this not only the case. SEBI is behaving that it is above the law of this land. Ours is a multi ligual country, where in the names in regianal laguages are spelt by different people in different ways. Small corrections in maes for opening of account, or investing in mutual funds are denined. its a general rule that spelling mistakes in proper nowns are to be accepted. and the evidence act says any thing given on oath has to be considered. but sebi wants the original records to be changed. it is very difficult to change the records of govt. where in the present case the sebi itself could not divulge the truth till it is in a fix.
Balan
1 decade ago
Vidya,
Nicely erased from public memory

Sebi officer in bribe net
http://www.telegraphindia.com/1100202/js...
Nagesh KiniFCA
1 decade ago
SEBI may not necessarily be corrupt. What we do not want is a honest idiot Regulator. It is time it takes constructive measure.
XY
1 decade ago
It's normal for certain types of people to hate SEBI. Never heard of criminals liking policemen! ;-)
Abraham
Replied to XY comment 1 decade ago
I have. Criminals love corrupt policmen ;-)
bhave
Replied to Abraham comment 1 decade ago
Abraham, where is your full stop? Please ensure correct grammar. We have an ace grammarian here who ignores substance and is interested in form. He is also looking for comic relief. So humour him Ok?
MADHUKAR SHETH
1 decade ago
Interesting battle between MBT & Vidya ( a SEBI girl, as alleged ?). While MBT/MoneyLife is doing good service to society, I am with SEBI even if they are overstepping their authority in collecting data. I am presuming that they do this to prevent wrong doing. I hope they dont listen to talks of big traders/brokers/FII only to get a TRADING TIP for their officers.
Somebody alleged "lining pockets of SEBI officers", but I think SEBI is reasonably clean organisation and far less corrupt or rather least corrupt amongst most govt organisations.
We can pardon some short comings of SEBI, looking at great improvements in the markets brought by SEBI.

Unlike Vidya, I am not working for SEBI. I have fought SEBI for their misjudgements against me in past. I was in the rally against SEBI in 1992 (when SEBI was formed) from BSE bldg to SEBI office at Nariman Point.
While BSE was king in 1990, arrival of SEBI in 1992 took away its powers and arrival of NSE in 1994 took away its riches. Most of us hate SEBI, but still, SEBI is the best thing that has happened to securities markets.
Sahoo
Replied to MADHUKAR SHETH comment 1 decade ago
So, you were wrong in 1992 (rally against Sebi) and right now?
asif sayeed
Replied to MADHUKAR SHETH comment 1 decade ago
Funny how you should extrapolate. SEBI has been around for 20 years and there is a slow degeneration process.
Nobody says SEBI should not collect data to go after wrong doers, but when government agencies use powers that are not specifically sanctioned, they become arbitrary. All govt agencies must follow a set of rules. Otherwise you create a system where an IAS couple has over Rs 320 crore or a collector in Mumbai has wealth of Rs 1000 crore.
lets not be naive about misuse of powers.

Also if SEBI was so honest why is there such a stunning silence about Joseph, their manager who was caught hand-in-glove with Nirmal kotecha?
Do we want that guy to get hold of phone records? How will SEBI assure us that someone like him wont use it to blackmail people?
If you don't know what I am talking about read
http://www.suchetadalal.com/?id=75a8cc37...
XY
1 decade ago
"respond to this statements"
"Do you or does you people know"
"Waiting for you answer"
" whatever you is your name"


I think Moneylife should employ people who can atleast construct grammatically correct sentences.
bhave
Replied to XY comment 1 decade ago
dear headmaster and chief nitpicker,
these messages, like SMS, are hurriedly written.
but who can teach you that. you the king of finding faults of others. congrats for your enlightening lost
XY
Replied to bhave comment 1 decade ago
"your enlightening lost"

Bhave, this sentence doesn't even make sense. I see nothing wrong in wanting certain basic standards of linguistic usage to be maintained. But you've begun creating sentences that are bereft of meaning. I suggest you go back to school. Thanks for making me laugh, anyway. You're good for comic relief.
bhave
Replied to XY comment 1 decade ago
good that i have been of some use.
and you must be a government official (with sebi?) with a lot of time on hands and using your hands in the best possible way ;-)
Ajay Desai
Replied to XY comment 1 decade ago
XY (what happened to the Z?. Lost in translation?)
please keep your stuffy "linguistic standards" or whatever crap at home. you can clearly see people are posting within a small text box and there are bound to be mistakes. take your "grammar" and shove it. oh my! look at my capitalisation! XY will come back thick and fast now. webmaster, please shut up this stuffed shirt
XY
Replied to Ajay Desai comment 1 decade ago
Incidentally, the size of my text box is the same as yours. But I see that people like you revel in your mediocrity just like pigs wallow in their own filth. Enjoy yourself and all the best.
abhay
Replied to XY comment 1 decade ago
XY

This just proves that may be you are just a good typist. N BTW, why cuss, if you have anything to say on merit. Obviously, you are looking at excelling at being a good typist and may be, cursing. Why don't u join the issue on merit.

SEBI exceeding its territory and jurisdictionhas AND CREATING THE FILTH been quite common in last couple of years.

Sample the following-
1. SEBI debarred an advocate from practicing before its officers first through an internal note and then through an order under SEBI act. This inspite of clear Legal position settled even by Supreme Court that only Bar Councils have jurisdiction in this matter. But then expecting knowledge of law from PVidyas and others who want to run SEBI like it were a Police thana in Rural Maharashtra is probably an insult to their "worthiness". Needless to say, as usual, SEBI got a big slap from SAT in this matter.
2. SEBI has been administering the consent process in a way that has made HPC a mere rubber stamp.
3. SEBI, on a complaint filed by one of its own ED's wife, decided in total disregard to its own position when it comes to interest rate futures and MF Gold funds, that it would regulate ULIPs

Fact is that for the last couple of years SEBI has totally forgotten that there is something called Rule of Law.
Ajay Desai
Replied to XY comment 1 decade ago
Wonder a superhuman like you doing among a bunch of mediocre bunch? Lost your way, is it? Cant be. This is not a wildly popular site. So what is your objective here? Whatever it is, why dont you stop wasting your time with us mediocrites and get lost? Or do you have some other agenda?
Angelo Extross
1 decade ago
The first action that should follow is a heavy detterent penalty be imposed on the concerned officer from SEBI who gave wrong information under RTI Act. The concerned RTI Activist must make an application to the Information Commissioner and specifically request that the fine be deducted in suitable installments from the salary and that a noting be made on his personal file. Only then will it be a triumph of the RTI Act.
Nagesh KiniFCA
1 decade ago
SEBI like IRDA is no authorised agency to bull doze telecom cos to provide info. when it has many better things to do in its regulatory jurisdiction.
VIDYA
1 decade ago
Phone tapping and collecting telephonic records are two different things. The latter is only collecting the data about whom the person concerned called and time of call. Content of the conversation is not revealed by such data. This type of data is used to establish synchronized trades, mostly in liquid scrips and for establishing the relationship between the persons dealing in securities. In my opinion the authors are trying to mislead the readers by referring to Mr. Ratan Tata's case and collecting data relating to telephonic calls of the suspected fraudster in the same paragraph. Collection of such data by SEBI can't be stretched to be interpreted as an infringement of right of privacy. Again the law mentioned by the author is actually about interception of call/message and not about collecting telephonic records such as who called the person at what time and whom did the suspected person call. The authors should refrain from writing such manipulative articles and realise their duty towards the readers.
abhay
Replied to VIDYA comment 1 decade ago
About interception and CDR, the whole debate is pointless. The DOT has clearly indicated that SEBI can NOT even seek CDR details from telecom companies. Once that is settled, what is PVidya trying to debate is not clear. But than SEBI exceeding its territory and jurisdictionhas been quite common in last couple of years.
Rakesh
Replied to VIDYA comment 1 decade ago
One simple query: why was this clean organisation, the messiah of the small investor lying to a simple RTI query? Please refer to
"All of a sudden, on 21st December, SEBI sent another reply giving point-wise additional information, which says it has been collecting call record data of about 2,327 subscribers. "
MDT
Replied to VIDYA comment 1 decade ago
Vidya...or is it your real name. Whatever it is, we for sure know that you work for SEBI. Have you posted this comment as official representative of SEBI? If yes, then pls respond to this statements...
"The SC ensured that the Department of Telecommunications (DoT) explicitly designate the agencies that can obtain telephone data. The DoT, in a letter, dated 10 December 2009 (a copy of which is available with Moneylife), clearly said that SEBI is not an authorised enforcement agency for intercepting or monitoring calls."
Do you or does you people know that seeking CDR or tapping a phone without any authority is offense under the Telecom Act? And by giving a clarification are you admitting your crime?Waiting for you answer....
Ram
Replied to MDT comment 1 decade ago
MDT, You have raised one pertinent issue here.
If Supreme court has clearly stated that SEBI is not an authorised enforcement agency to intercept or monitor calls. Let us assume SEBI officials are not intercepting or monitoring calls.
Now the question is are SEBI officials authorised to ask for call data from Telcos ?
Are Telcos authorised to provide info on call data or Logs to SEBI ? Is there a violation of some Law here ?.

I must confess there is an element of truth in what Vidya says as there is a big difference between intercepting and monitoring calls as in Nira Radia case and simply getting printouts of call logs.
abhay
Replied to Ram comment 1 decade ago
What if PVidya is misleading by trying to portray that SEBI can seek CDR details, where as the truth is that DOT has clearly stated that SEBI is not even authorised to seek call Logs !!!
Vidya
Replied to MDT comment 1 decade ago
MDT, it is painfully apparent that you have not applied your mind to my statement. Intercepting and monitoring calls is different from collecting data regarding call timings and persons to whom calls were made. Unless you perceive this distinction, you will fail to appreciate my argument.

P.S. It is somewhat hypocritical for a person concealing his own identity to ask another person about their identity. Nevertheless, the focus should be on the content of arguments and not on their source. For your satisfaction, let me state that I do not work for SEBI.
MDT
Replied to Vidya comment 1 decade ago
Vidya....or whatever you is your name...MDT stands from Moneylife Digital Team and we repeat and confirm, according to our information, you indeed work for SEBI. So dont tell lies. Do you know the difference between CDR and tapping? If no, then ask your team what they had used as proof in the Pyramid Saimira case.
Vidya
Replied to MDT comment 1 decade ago
It is quite shameful that as an official representative of the website, you are not arguing the matter on merits but rather trying to insult, intimidate and make personal attacks on readers who comment on your articles. If you do not appreciate dissent and discussion, close down the 'comments' section of your website. It is upto SEBI to defend themselves on this forum or not but I am for sure not here to defend them. It was my personal opinion about the article. You are free to disagree.
balan
Replied to Vidya comment 1 decade ago
I can clearly see MDT is replying on merit. If there is a touch of arrogance, cant blame them. They alone have been writing the sad truth about Sebi
Vickram
Replied to balan comment 1 decade ago
@Vidya: it is natural to feel aggrieved at being mistaken for a SEBI official. However, the article points at serious illegalities being conducted by SEBI officials, wrt telephonic data. As can be seen by looking over comments in response to other articles in Moneylife, spurious commenting by government officials and their agents seem to have become an endemic part of the job description.

It is entirely true that regulators in other countries are empowered to track all communications of anyone with a perceived vested interest in a stock transaction. That is how 'famous people' like Martha Graham have been convicted in the past. However, this is done as part of an integrated transparency policy, which is closely monitored in public. Transgressions, such as overstepping the limit by regulators, are punished as severely.

The situation in India is quite different. Our surveillance practices are the outcome of a colonial mindset that continues within the security agencies, not any attempt at providing transparency of government, or even of decent governance. The imperatives are nearly completely reversed, which is why regulatory authorities need to walk the talk. It is worse than useless to talk of stockmarket scams, when officials themselves countenance wrongdoing, for the regulator needs to show itself worthy of the nation's trust - it has not been conferred as a heavenly boon.

It is interesting that some senior government officials are now being charged in court for such transgressions. It cannot undo the past, but hopefully we will see some positive change, in terms of sincerity, of government officials in the future.
abhay
Replied to Vidya comment 1 decade ago
I am truly touched by your concern for merit, PVidya.

Want to join a discussion purely on merits on the "rights and wrongs" of SEBI's actions in last couple of years??

Be my guest!!!

Should we start with Pyramid Saimira? Or may be NSDL matter?
Rekha
Replied to MDT comment 1 decade ago
I agree with Vidya and would urge the MDT team to reply not on arrogance but on merits. If youo have rights to disagree on SEBI decisions, readers including SEBI have equal rights to disagree. SEBI as legal agency cannot simply keep replying to all & one including you for every article written by you. Moreover, the arrrogance on the part of your author in replying only proves that you simply do not have ethics to accept if something you have wrritten in not accepted/welcomed by someone.
I also agree that tapping a live phone is altoghether different then co-relating a completed telephone talk details based on its timings, locations & its registrations. No where such details can give the nature of talk (like radia tapes) but it certainly gives vital clue to a investigating agency like SEBI to take it forward for effective & forceful manner. MDT has always been forfront in critising SEBI for not taking sufficient actions against culprits of scams at times just on the basis of romours (which they very well know can not be presented in court of law & became evidence to nail the accused) and so called market operators. If SEBI has been trying its best to get legally tenable evidence based on forensic investigations methods includig co-relating various loose evidences, what harm it does have on an individual. Moreover, it will only help investors at large.

similarly, If at all SEBI has painfully tried to evade RTI query, I believe it has duly rectified itself by giving detailed reply to queriest.
MDT
Replied to Rekha comment 1 decade ago
Rekha....Do you really know what SEBI is? FYI..it is a market regulator and not investigating agency, except in certain cases where it is mandatory for the investigators to seek approval from the SEBI Board. We would be happy, if SEBI can be more vigilant rather than 'following the cases', like police shown in Hindi movies. Here they are procuring the CDR by writing a simple letter without any authority (it is called as illegally, in common lingo). Remember the SEBI manager arrested in Pyramid case. He used SEBI letterhead and simply forged signatures. Hope you understand, unless off course you do not want to.
balan
Replied to Rekha comment 1 decade ago
How nice. I like your last line.
If you get caught and then "rectify" the "mistake", its all fair and square is it?
abhay
Replied to Rekha comment 1 decade ago
About interception and CDR, the whole debate is pointless. The DOT has clearly indicated that SEBI can NOT even seek CDR details from telecom companies. Once that is settled, what is PVidya / Rekha trying to debate is not clear. But than SEBI exceeding its territory and jurisdictionhas been quite common in last couple of years.
vikas
Replied to MDT comment 1 decade ago
MDT, your arrogance is apparent. This is surely not the right way to argue.
rakesh
Replied to vikas comment 1 decade ago
nice attempt to divert attention from the main issue
GS
1 decade ago
People always suspected that the regulator is not serious about enforcing the law and can be managed by lining the officers' pockets.

The long drawn out processes, the abysmal number of convications, the high number of appeals lost at SAT stage, all point to the low quality of litigation - deliberate - cynics say - to provide easy escape route to those willing to pay.

If given the right to tap phone lines, it would be definitely useful to trap operators, circular trading and front running and insider trading at the same time giving multiple sources of income to its officers.

The retail investor would not benefit in either case.
Babubhai Vaghela
1 decade ago
I see no reason why Chairman SEBI should not be sacked for criminal act of invasion of privacy by abusing positional power.
Rakesh
Replied to Babubhai Vaghela comment 1 decade ago
Why should he be when the entire media thinks he is honest, straight and a messiah of the investors!
Ram
Replied to Rakesh comment 1 decade ago
Rakesh, the entire nation including the media also believes that our PM is honest,straight and a messiah of India. How do we solve this puzzle?
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