Regulate at your own risk

Last week, an alleged violator filed a criminal complaint against officials of an exchange, considered the frontline regulator. In my few years in the financial markets, this is a new low. Reports suggest he may also initiate civil proceedings for damages. While the merits of the case are for the courts to decide, the event highlights a disturbing trend that has become more pronounced of late.

Regulators and investigating agencies are increasingly becoming targets of such personal attacks across the financial services spectrum at all levels.

In June, K M Abraham, the then whole-time member of the Securities and Exchange Board of India (Sebi), had written to the prime minister about the harassment a colleague and he had to face at the hands of corporate vested interests, whose cases he was investigating.

Around the same time, another senior official at the Enforcement Directorate, the central agency that probes money laundering offences, had to seek help from the Supreme Court to keep a corporate group from interfering in his investigations. In July, the Press Trust of India reported that this officer wanted to recuse himself from these investigations, citing harassment through frivolous complaints.

In November, former Sebi chairman C B Bhave said in an interview: “I am being maligned in a proceeding to which I am not a party.” Bhave was talking about the references in an affidavit filed by the government in the highest court of the country. Though Bhave recused himself from regulatory proceedings against NSDL, his past connection with the organisation routinely used to harass him at various fora. Bhave was at the helm of the team that was investigating high-profile cases against many large corporate houses.

The latest in the target list are some senior serving and retired regulatory officials. In a recent letter to the prime minister, the chief of a large corporate group has attributed motives to regulatory actions. Personal attacks are strewn all over the letter and some officers known to be honest and upright are singled out for nothing more than doing their duty.

The media can play a role here. But, after some recent successes, defamation suits are back with a renewed vigour. Corporate groups have always used these as a potent weapon to neutralise probing reports by the media and now even some individuals with questionable backgrounds have started using these to silence criticism and harass critics. Though defamation laws in India are said to be weaker than those in the West, their harassment potential is significant. There are instances where erudite columnists have been branded as partial and gagged from writing on a particular subject.

Though truth is the best defence in defamation suits, given the timeline in our courts and the ability of companies to feed lawyers generously and endlessly, these might drag on for years, turning an irritant that deters future attempts at any meaningful probe. A few may stand up. But a majority will choose pragmatism over bravado. Whose loss is it?