Sebi to get sweeping powers while probing insider trading cases

Capital market regulator Sebi will soon get powers to summon phone call records, emails and SMSes of persons it is probing for insider trading and other market manipulations.

With these powers, the Securities and Exchange Board of India (SEBI) aims to prevent black money coming into the market as well as to keep an eye on insider trading.

Sebi's plea for such powers has been endorsed by the finance ministry which late last month wrote to the ministry of home affairs for designating the capital market regulator as agency authorised to receive call data records (CDR).

Sources said Economic Affairs Secretary Arvind Mayaram late last month wrote to Home Secretary seeking designating Sebi as agency authorised to be a recipient of CDR information related to calls, emails and SMSes under the Indian Telegraph Act, 1885.

This followed a meeting Finance Minister P Chidambaram took on May 15 to discuss how SEBI can be enabled to requisition and receive CDRs of calls, SMSes and emails available with telecom/other service providers.

Sources said Section 11C of the SEBI Act empowers the regulator to call for information and records from any intermediary or person in respect of any transaction in securities which it is investigating.

Sebi, as per this section, is an investigation agency for offences related to market fraud and insider trading and can thus summon CDRs.

Sources said the ministry asked MHA to operationalise an arrangement for SEBI being designated as an agency which can requisition and receive CDR information related to calls, emails and SMSes under the Indian Telegraph Act, 1885.

The market regulator has been seeking government's help in getting call data records and e-mail records from the service providers of persons being probed by Sebi in cases of insider trading and other market manipulations.

However, the regulator is not asking for powers to snoop on telephonic conversations.

CDRs generally list out the number of conversations between two or more entities and are different from phone-tapping, wherein an agency can snoop on or record the telephonic conversations of those suspected to be engaged in some wrongdoings.

Regulators in the US and some other countries have often used tapped phone conversations to prove insider trading and other charges, including in the famous Rajat Gupta case.

Currently, the phone-tapping powers are restricted to only a few agencies in India, including the CBI and the tax department.

Sources said the finance ministry is separately considering amendments to the SEBI Act, SCRA and the Depositories Act to strengthen the regulator's powers.