Sebi eyes greater foreign help to catch manipulators

Having been very prompt in replying to information requests from its oversees peers, Sebi is also looking at greater help from foreign regulators in its attempts to check investor frauds and market manipulations.

The move assumes significance in the wake of cross-border transactions gaining more prominence in financial markets, which in turn is also leading to a larger number of fraudsters and market manipulators trying to use offshore locations to avoid regulatory actions.

Armed with greater powers to seek information from "other authorities, whether in India or outside India", Sebi is now forcefully seeking required information from its peers in foreign countries for prevention or detection of violations in respect of securities laws, a senior official said.

These powers have been granted to Sebi through the Securities Laws (Amendment) Second Ordinance, which was promulgated in September this year to amend Sebi Act and other regulations governing capital markets. The Ordinance needs to be replaced by an Act after passage of the Securities Laws (Amendment) Bill, 2013 in the next Parliament session.

As per the Ordinance, Sebi can enter into "an arrangement or agreement or understanding" with foreign authorities with the prior government approval for such information exchange.

Sebi has been very prompt in providing information to its overseas counterparts with which it has entered into MoUs, but the quantum of such information exchange so far has been skewed in favour of outward flow, the official said, while adding that the situation has begun to change drastically now.

Also, Sebi has been always very prompt in replying to such queries, which has been acknowledged by global bodies like IMF and IOSCO (International Organisation of Securities Commissions), but some foreign regulators were not equally prompt in replying to the Indian regulator's requests in past.

However, Sebi has managed to effectively advocate its case at various global forums in this regard over the recent months and subsequently it has begun receiving a greater cooperation from the overseas regulators, the official added.

Sebi is signatory to the IOSCO Multilateral MoU on international cooperation and information exchange. It has also entered into several bilateral MoUs including with its peers in the US, Malaysia, Mauritius and Hong Kong. 

Sebi received a total of 37 'requests for information' in the last fiscal 2012-13 from overseas regulators seeking its assistance under the IOSCO MMoU or the respective bilateral MoUs. Sebi addressed and executed all these requests as per the provisions of the MMoU or the respective MoUs.

On the other hand, nine such requests were made by Sebi to respective regulatory bodies of other countries. The numbers of both inward and outward requests have gone up substantially in the current fiscal, the official added.

In last three years, Sebi has received an average of thirty requests per annum and roughly 70–80 per cent of these requests have been answered within 15 days.

Some of the requests involved collection of information from other entities or authorities, such as bank records, and they took longer time of 45-90 days. Besides, not a single case has been brought against Sebi before IOSCO's monitoring group for 'complaints on cooperation'.