Illegal phone-tapping case: ED seeks info from NSE on iSec Services

ED may register fresh money laundering case in the illegal phone tapping matter

The Enforcement Directorate (ED) has sought an explanation from the National Stock Exchange (NSE) as to why it gave the contract for its systems auditing to little-known iSec Services, which has “limited expertise”.

It also wants to know the terms of the contract and whether the NSE knew the firm had also audited the servers of some brokerages that allegedly gained from the co-location facility, which gave them preferential access to the exchange trading platform.

The move comes after the federal agency stumbled upon transcripts of phone calls during its ongoing money-laundering probe stemming from the co-location case.

“We have sought information from the NSE about its server audits and the contract awarded to iSec Services,” a senior official told Business Standard.

The agency is examining some new findings and may register a fresh case under the Prevention of Money Laundering Act (PMLA), the official added.

“The NSE is learnt to have provided most of the required information and reports to the agency. They are under examination. However, it failed to give any clear reply on iSec,” the official cited above said.

A detailed email sent to the NSE on Monday remained unanswered.

Whether the present management was in the loop on this is also part of the probe.

Notably, the surveillance set up by iSec was disposed of as e-waste in 2019.

The ED is also looking into whether the current management or auditors raised the red flag or if they enquired about such contracts while destroying iSec-related evidence.

The contract with iSec is learnt to have terminated in February 2017, within two months of Chitra Ramkrishna’s exit as chief executive officer (CEO). The new management came in July that year.

Ramkrishna, former NSE CEO Ravi Narain, iSec Services, and former Mumbai police commissioner Sanjay Pandey, who floated iSec, were booked last week by the Central Bureau of Investigation (CBI) for allegedly snooping on the exchange’s key employees.

Sources said the ED would again summon Pandey in the matter after examining the taped conversations. He was questioned on July 5.

Meanwhile, the CBI, which is probing corruption charges in the case, suspects Pandey leaked crucial information to some firms.

“A preliminary examination of the transcript reflects some price-sensitive information about companies, margins, trading data, etc was leaked,” another official said.

The data is in tetrabytes, which needs detail crunching, the official added.

It has been argued that iSec was not appointed statutory auditor but for a special project. The project was “Periodic study of cyber vulnerabilities” at the NSE, and the contract value was Rs 4.45 crore.

When iSec was set up, Pandey was not in the Indian Police Service and he quit as director in 2006. His mother and son are directors of the company.

iSec was one of the firms that had carried out audits at the NSE when the colo case happened.