The Securities and Exchange Board of India (SEBI) has been trying to increase its regulatory powers for long. Initially, SEBI was able to acquire the power to monitor investor’s call records and conduct searches at companies suspected of wrongdoing. Now SEBI is contemplating forming of an office of international affairs (OIA) for surveillance and information sharing purposes.
Information and communication technology (ICT) is increasingly being used for business and other purposes. This results in spreading of relevant information in different parts of the world. In the absence of international cooperation, regulators and law enforcement agencies cannot investigate frauds and crimes effectively. Naturally, SEBI has to coordinate with its international counterparts for effective investigation of security related matters.
SEBI has constituted a full-fledged “International Affairs” team and is also working on a “comprehensive study” to understand the surveillance mechanism of regulators in developed markets like the US, UK, Australia and Hong Kong. The study would include analysis of foreign regulators’ “surveillance infrastructure and techniques to decipher patterns in the trading, formation of associations between entities and gathering of market intelligence including linkage of price volume pattern to market information”. Further, the best practices followed in developed markets relating to surveillance of algorithmic and high-frequency trading, which uses latest technology to execute trades in milli-seconds, would also be looked into.
The office of international affairs (OIA) at SEBI would act as a central facilitation cell for overseas entities having regulatory issues and concerns relating to Indian securities market. In appropriate cases, OIA will seek to flag and coordinate such issues with relevant departments within SEBI. Similarly, securities market participants from India may request OIA for regulatory assistance. The OIA is also tasked with keeping SEBI abreast of global developments, so that necessary steps can be taken by it while introducing and implementing regulatory measures.
While this is a good step in the right direction yet SEBI has to take care of many techno legal issues in this regard. For instance, SEBI has to comply with privacy laws, data protection requirements (PDF), cyber law due diligence (PDF), cyber security requirements, etc. These regulatory requirements are not clear and this may create trouble for SEBI in the long run. There is an urgent need that Narendra Modi government must ensure privacy to Indians. The e-surveillance policy (PDF) must also be formulated as soon as possible.