Two recent incidents have raised doubts about the checks employed by the stock market regulator, the Securities and Exchange Board of India, to ensure that its staff and other personnel do not compromise the credibility of the institution. The Central Bureau of Investigation is reportedly investigating whether some SEBI officials received bribes in the NSE colo case. The CBI suspects that the traders who were gaming the system, to be ahead of the others in executing algorithmic trading orders, had made certain officials of SEBI pass regulatory orders that were conducive to them.
In another development, a BusinessLine report pointed out that operators in Mumbai and Gujarat may have accessed the list of stocks that were to be placed under Additional Surveillance Mechanism (ASM) by SEBI. These traders seem to have profited from this information by short-selling the stocks ahead of public dissemination of the information. SEBI has taken note of this incident and is investigating the matter.
Besides this, it has also been commonly seen that recommendations of the SEBI board have appeared in media publications much ahead of the board meeting day. Similarly, some of the recommendations of special committees formed by SEBI have also been leaked a few days ahead.
These point towards lack of vigilance within SEBI to protect sensitive information. It is also points to absence of rules governing the extent of communication that can be permitted between SEBI officials, directors and external experts to those outside.
In the last three decades of its existence, SEBI has emerged as a strong and credible regulator, one that is feared and respected by all the stakeholders. If it wants to hold on to the formidable position it currently occupies, it needs to review and sanitise its channels of communications with the outside world, plug the leaks and deal strictly with those officials who have misused their positions for pecuniary gains.
Lokeshwarri SKAssociate Editor