CBI raids: Sebi may approach FinMin

Regulator miffed with the extensive searches carried out at residences of Sebi officials in MCX-SX licence grant case

The Securities and Exchange Board of India (Sebi) is likely to seek clarity from the Finance Ministry on Central Bureau of Investigation's (CBI's) scrutiny of its staffers in various high profile cases.

Regulator 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.

Searches were also conducted at residence of former whole time member K M Abraham and former executive director J N Gupta in connection with the license grant case to MSEI, formerly MCX Stock Exchange.

The federal agency had booked these officials under anti-corruption act for allegedly granting extension in recognition of MCX-SX in August 2014. The case was registered on the basis of findings of a preliminary enquiry which was filed against former Sebi chief CB Bhave, Sebi officials mentioned above, MCX and FTIL. The PE was turned into an FIR but the agency did not find any criminality on the part of Bhave. CBI had recommended departmental action against Abraham.

Irked with the latest move, Sebi Employees Association (SEA) has written to Sebi chief UK Sinha requesting intervention in ensuring that an institutional mechanism is put in place to respond to such inquiries by external investigative agencies. In the letter, they have demanded an environment where Sebi officers can discharge their duties without any fear of selective scrutiny.

At present, there is no institutional mechanism within Sebi to handle these matters. "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. The board of Sebi in 2009 had also proposed to finance ministry for amendment to section 23 of Sebi Act that no external agency should be able to seek depositions from Sebi officials without the consent of central government (in case of chairman and members) or the chairman (in case of other officers)." said Sumit Agrawal, Partner, Suvan Law Advisors.

However, this is not the first time when CBI had scrutinize the officers in charge. Over 70 officials have been called upon by federal agencies for questioning in matters they have either investigated or dealt with in an official capacity. The intensity of these actions have increased in the past two years over dozen of high-profile cases including-- Saradha scam, Rose Valley chit fund scam, National Spot Exchange crisis, controversy, PACL matter, Emkay collateral, DLF's issues, Financial Technologies' alleged unfair practices, Bank of Rajasthan merger with ICICI among others.

However, some legal experts feel that everyone is accountable when it comes to fact findings. "Any action taken in good faith by a Sebi official should get the protection that is given to it under the Sebi Act. Though there cannot be any protection against a fact finding investigation, in absence of any mala fide, any enforcement action by an authority like CBI, has the potential to disrupt the functioning of Sebi as well as the entities that it regulates,"said Manshoor Nazki, ex-Sebi official and a lawyer with Luthra & Luthra Law offices.