In House panel meet, SEBI flags need to tap phones during probe

During a recent interaction with the Parliament Standing Committee on Finance, the Securities and Exchange Board of India (SEBI) took up the contentious issue of being granted the power to tap telephones.

Securities and Exchange Board of India (SEBI):

• The SEBI is a statutory regulatory body established by the Government of India in 1992. It was given statutory powers through the SEBI Act, 1992.

Why was SEBI formed?

• SEBI was established to keep a check on unfair and malpractices and protect the investors from such malpractices.
• The organization was created to meet the requirements of the following three groups:
  • Issuers: SEBI works toward providing a marketplace to the investors where they can efficiently and fairly raise their funds.
  • Intermediaries: SEBI works towards providing a professional and competitive market to the intermediaries
  • Investors: SEBI protects and supplies accurate information to investors.

Powers of SEBI:

Quasi-judicial powers:

• In case of frauds and unethical practices pertaining to the securities market, SEBI has the power to pass judgments.
• The said power facilitates to maintain transparency, accountability and fairness in the securities market.

Quasi-executive powers:

• SEBI has the power to examine the Book of Accounts and other vital documents to identify or gather evidence against violations.
• If it finds one violating the regulations, the regulatory body has the power to impose rules, pass judgements and take legal actions against violators.

Quasi-legislative powers:

• To protect the interest of investors, the authoritative body has been entrusted with the power to formulate suitable rules and regulations.
• Such rules tend to encompass the listing obligations, insider trading regulations and essential disclosure requirements.
• The body formulates such rules and regulation to get rid of malpractices that are prevalent in the securities market.

Power to tap phones

• In India, the lawful interception of communication by authorised law enforcement agencies (LEAs) is carried out in accordance with Section 5(2) of the Indian Telegraph Act, 1885.

Rule 419A of Indian Telegraph (Amendment) Rules 2007

• Using as Last Resort: The law is clear that interception must be ordered only if there is no other way of getting the information.
• Rule 419A mentions that while issuing directions under sub-rule (1) the officer shall consider the possibility of acquiring the necessary information by other means and the directions under sub-rule (1) shall be issued only when it is not possible to acquire the information by any other reasonable means

Agencies with interception powers

• Over the years, SEBI has been seeking to be added to the list of 10 agencies with telephone interception powers to put it on par with its global counterparts such as the US Securities Exchange Commission (SEC).
• These 10 agencies include:
  • Directorate of Enforcement,
  • Central Board of Direct Taxes,
  • Directorate of Revenue Intelligence,
  • Central Bureau of Investigation,
  • National Investigation Agency,
  • Research & Analysis Wing (R&AW),
  • Directorate of Signal Intelligence, Ministry of Defence- for Jammu & Kashmir, North East & Assam Service Areas only,
  • Director General of Police, of concerned state/Commissioner of Police, Delhi for Delhi Metro City Service Area only.
• However, these agencies have to take prior permission from the Union Home Secretary to intercept telephonic communications.
• Currently, the SEBI is authorised only to access CDRs (Call Detail Records).

Remedies

• Unlawful interception infringes the right to privacy and the aggrieved person can file a complaint in the Human Rights Commission.
• An FIR can be lodged in the nearest Police Station when illicit phone interception comes into the knowledge of the person.
• Moreover, the aggrieved person can approach the Court against the person/company doing the Act in an unauthorised comportment under Section 26 (b) of the Indian Telegraph Act which provides for the imprisonment of 3 years for persons held for unlawful interception.

Exam Track

Prelims Take Away

• SEBI
• Powers of SEBI
• Agencies with interception powers