The chief vigilance officer of India’s stock market regulator has sent an internal mail to all employees saying his office has been getting complaints alleging that some officers are “in constant touch” with others to settle certain cases.
“Vigilance cell has been in the recent past receiving complaints alleging inter alia that some officers are in touch with other departmental officers to get certain cases settled,” R.K Padmanabhan, chief vigilance officer of the Securities and Exchange Board of India (Sebi), said in the 17 October message.
He also said some officers are in contact with consultants and advocates who frequently visit Sebi.
“Though the complainants are not willing to come forth with corroborative evidence or lodge formal complaints, such allegations are being repeatedly brought to the notice of vigilance cell of Sebi,” Padmanabhan, who is also an executive director, said in the mail.
Padmanabhan, a Maharashtra cadre Indian Police Service officer, joined Sebi in September.
He noted in his mail that integrity was critical for maintaining the high standards expected of a regulatory body. He further emphasized that apart from maintaining one’s own integrity, Sebi officials should report to the chief vigilance officer any lapses that come to their notice.
“All officials are hereby requested that in addition to setting high standards of his/her own personal integrity and setting a good example for his/her subordinates, each official also has a duty to bring to the notice of the chief vigilance officer any instance of lack of integrity and/or devotion of duty in their knowledge,” the mail said.
In response to Mint’s queries on the issue, the Sebi spokesman said: “As per the directions of Central Vigilance Commission (CVC), all organizations, falling within the advisory jurisdiction of the CVC, have to observe Vigilance Awareness Week to sensitize the employees about the need to preserve probity and integrity.
“On the eve of Vigilance Awareness Week, the chief vigilance officer of Sebi had sent an internal mail to all Sebi employees highlighting the importance of maintaining high standards of integrity and impartiality. The intention was to sensitize the employees about the same. Any attempt to infer such emails as commenting on the conduct of employees is misplaced,” the spokesman added.
In early 2010, the Central Bureau of Investigation arrested an assistant general manager of Sebi in Kolkata for allegedly demanding a bribe of Rs.25 lakh from the director of a Kolkata-based group of companies. The officer was suspended.
“The internal mail of Sebi is indeed eyebrow-raising, if not outright alarming,” said professor Rajesh Chakrabarti, a faculty member at the Indian School of Business, Hyderabad, who tracks the regulator closely.
“While the nature of contacts of Sebi officials with outside individuals that have prompted the mail is left unclear, like any other regulator, Sebi is not beyond the possibility of corruption,” he said. “It is heartening to know that Sebi’s internal vigilance is taking appropriate steps to avoid such situations in future.”
“One hopes that no wrongdoing has actually occurred, for the consequences of corruption within Sebi can be truly harmful for the country as well as for investor confidence in India,” Chakrabarti added.
According to a former executive director of the regulator, the rule in Sebi is that officials are not supposed to disclose what they are working on to others.
“But when we are working on some regulations that involve intermediaries and investors, we include them in the process,” he said. The former executive director did not want to be named.
Earlier in the year, former Sebi board member K.M. Abraham wrote a letter to Prime Minister Manmohan Singh, alleging irregularities. Sebi chairman U.K. Sinha had then said Abraham’s allegations had no substance. It was later discovered that Abraham had sent a second letter on 1 June to the Prime Minister (with a copy to CVC that looks into improprieties in government departments) making allegations about Sinha and the finance minister’s officer on special duty Omita Paul.
A few months ago, a public interest litigation (PIL) was filed in the Supreme Court challenging amendments to rules governing the appointment of members in Sebi. It alleged that the amendment allowed Union finance minister Pranab Mukherjee to appoint two members “of his own choosing”.
The PIL, filed by retired air marshal S. Krishnaswamy and others, also sought to annul the appointment of Sinha as Sebi chairman.
The petitioners were asked to withdraw the petition and refile it without allegations against Mukherjee.
Sebi’s consent mechanism has, of late, drawn criticism from some quarters as retail investors’ interests are involved in many cases where the magnitude of the offence may dwarf the terms of the settlement.
Sebi chairman Sinha is reviewing the consent process to make it more transparent and uniform.
A senior Sebi official, who did not want to be identified, said there was intense pressure on the regulator from companies and that the challenge was to withstand this and be fair to all.
Vyas Mohan
CAclubindia
