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Sebi can now seek call data records, says Bombay high court

Friday, 2 May 2014 - 6:00am IST | Place: Mumbai | Agency: dna

The Bombay high court recently allowed the Securities and Exchange Board of India (Sebi) to ask for call data records (CDR) of any person it feels necessary.

The stock market regulator has for the past several years sought sensitive data of subscribers from telecom and Internet service providers to assist itself in investigating market frauds despite having no authority to do so.

Sebi's long-standing request to be included in the permitted list of law enforcement agencies that have the authority to seek CDRs related to calls, emails and text messages, is still pending with the central government. But the court verdict has cleared the way for the regulator to go ahead and seek such sensitive information for future investigations as an enabling ordinance was promulgated again on March 28, 2014.

While hearing a PIL filed by the Mumbai-based Indian Council of Investors over Sebi's arbitrariness in calling for CDRs without any authority, the high court last week gave the market regulator a go-ahead to seek CDRs.

While pronouncing the judgment, the court also emphasised on the right to privacy of subscribers, a source said. The copy of the order is still to be uploaded on the high court's website.

Section 11C of the Sebi Act says the regulator is also an investigating agency for offences related to market fraud and insider trading. Which is why Sebi always enjoyed the right to call for information and record from any intermediary or any person in respect of any transaction in securities that is under its investigation or inquiry. But the government did not give the authority to seek CDRs.

A Mumbai-based lawyer, practising in securities laws, told dna that there are hundreds of statutory authorities in the country such as municipal corporations and tax authorities that have powers to summon "any person", if they are initiating any investigation.

"Therefore if it is held that designation under the Telegraph Act is not required for requisitioning CDRs, then all these authorities can also call for such sensitive records. It will be a huge test for the right to privacy," he said.

After several attempts by Sebi and the finance ministry over the past seven-eight years to get empanelled under the Telegraph Act, the home ministry had said the proposal would be considered through the proposed amendments in the Indian Telegraph Rules, 1951.

Under the Telegraph Act, only certain law enforcement agencies are authorised by the ministry for intercepting and monitoring and seeking call data records and details of tower locations.

The home ministry suggested that Sebi could access CDRs from two investigating agencies under the finance ministry — the Enforcement Directorate (ED) and the Department of Revenue Intelligence (DRI) — Till the amendments are carried out.

But the revenue department denied this option in 2010 saying information collected by the two agencies is for specific purposes and therefore, could not be shared.

The home ministry, in a reply in July 2010, said the present legislative scheme does not permit CDRs to be accessed by any agency not empowered by the Act.

Sebi has, however, continued to seek CDRs directly and regularly from telecom service providers. It has used this investigation tool in several recent cases. And it is evident from Sebi's orders like in the case of Pyramid Saimira Theatre Ltd.

The government has prescribed norms and procedures for law enforcement agencies to follow while intercepting, monitoring or seeking telephonic communications and data.

Only certain authorised agencies can intercept, monitor or seek CDRs under certain circumstances such as in the interest of public safety, in the interest of upholding the sovereignty and integrity of India, maintaining friendly relations with foreign states and during any public emergency as per the Indian Telegraph Act, 1885.

"Sebi is not on the list of such approved enforcement agencies. While some telephone/Internet service providers cooperate with Sebi in its investigations, some other service providers have expressed unwillingness to share CDRs," a senior official said. "This refusal has many a time impeded the course of effective investigation by officers of Sebi into cases of suspected market manipulation or fraud."

Sebi chairman UK Sinha has said in the past that CDRs can be a useful tool in investigations. "We are not asking for powers to snoop on the conversations between two entities or to do phone-tapping. We are only asking for CDRs of persons we are investigating and we want to know about the parties they (the entities under probe) have been interacting with."

CDRs list out the number of conversations between two or more entities and are different from phone-tapping where an agency can snoop on or record the telephonic conversations of suspects.

In the past, some telecom companies have taken up with the telecom department the market regulator's demand seeking CDRs, questioning Sebi's legal powers to seek such details.

Under Indian Telegraph Act, only a few law enforcement agencies such as CBI, ED and DRI are authorised by home ministry for monitoring and seeking call records
•Stock market regulator Sebi seeks CDRs regularly from telecom service providers; used this investigation tool in several recent cases
•Parliament could not pass the Securities Laws (Amendment) Bill 2013 in the winter session; ordinance lapsed on January 15; It was re-promulgated on March 28
•Sebi is still not part of the permitted list of law enforcement agencies having authority to summon for CDR, because it needs an amendment to Indian Telegraph Act

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