 "Sebi officials feel CBI heat")
Sebi is believed to be miffed with the extensive searches conducted by CBI on Tuesday at the residences of five current and former Sebi officials, including Executive Director S V Murlidhar Rao, Deputy General Manager Rajesh Dangeti, Assistant General Manager Vishakha More, former whole-time member K M Abraham and former executive director J N Gupta in connection with the case of granting a licence to MSEI, formerly MCX Stock exchange (MCX-SX).
CBI had booked these officials under the anti-corruption act for allegedly granting extension in recognition of MCX-SX in August 2014. The case was registered on the basis of a preliminary enquiry filed against former Sebi chief C B Bhave, the officials mentioned above, MCX and FTIL. An FIR was filed despite CBI not finding any criminality on the part of Bhave, while it recommended departmental action against Abraham.
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Irked by this, the Sebi Employees Association (SEA) had written to Sebi Chief U K Sinha requesting his intervention in ensuring that an institutional mechanism is put in place to respond to such inquiries by external investigation agencies. SEA also called for the creation of an environment where officers could discharge their duties without the fear of selective scrutiny, said the letter.
At present, there is no institutional mechanism in Sebi to handle these matters. "[The] need of the hour is establishing institutional mechanisms at regulators to deal with external agencies so that its officials do not grieve as long as their acts are not done dishonestly," said Sumit Agrawal, Partner Suvan Law Advisors. He added that Sebi's board had in 2009 written to the finance ministry seeking an amendment to section 23 of Sebi Act to ensure that no external agency be able to seek depositions from its officials without the consent of the central government (in case of chairman and members) or the chairman (in case of other officers).
However, this is not the first time that CBI has scrutinised those in charge of Sebi. Around 70 officials have been called for questioning in matters they have either investigated or dealt with in an official capacity. The frequency of these actions has increased in the past two years as a result of a dozen high-profile cases including the Saradha scam, Rose Valley chit fund scam, National Spot Exchange crisis, among others.
However, another legal expert felt everyone was accountable when it comes to fact finding. "Any action taken in good faith by a Sebi official should get the protection given under the Sebi Act. Though there cannot be any protection against a fact finding investigation, in the absence of any mala fide intent, any enforcement action by an authority like CBI, has the potential to disrupt the functioning of Sebi and the entities it regulates," said Manshoor Nazki, a former Sebi official and lawyer with Luthra & Luthra Law Offices.
However, others believe processing officers have their limitation and don't have rights to approve or reject decisions. "It is sad that many regulatory officials have to suffer, who may not be even authorised to decide and are just cogs in the wheel of decision-making. At Sebi, the buck stops with the chairman and whole-time members," said a former regulatory official on the condition of anonymity.
THE STORY SO FAR
- Oct 7, 2008: Sebi grants in-principle approval to MCX-SX to start as stock exchange
- Oct 7, 2009: Sebi allows renewal of recognition of stock exchange to conduct trade in currency derivatives