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SEBI and Communication Surveillance: New Rules, New Responsibilities?

Posted by Kovey Coles at Jun 27, 2013 10:55 AM |
In this blog post, Kovey Coles writes about the activities of the Securities Exchange Board of India (SEBI), discusses the importance of call data records (CDRs), and throws light on the significant transition in governmental leniency towards access to private records.

This research was undertaken as part of the 'SAFEGUARDS' project that CIS is undertaking with Privacy International and IDRC


The Securities Exchange Board of India (SEBI) is the country’s securities and market regulator, an investigation agency which seeks to combat market offenses such as insider trading. SEBI has received much media attention this month regarding its recent expansion of authority; the agency is reportedly on track to be granted powers to access telecom companies’ CDRs. These CDRs are kept by telecommunication companies for billing purposes, and contain information on who sent a call, who received a call, and how long the call lasted, but does not disclose information about call content. Although SEBI has emphatically sought several new investigative powers since 2009 (including access to CDRs, surveillance of email, and monitoring of social media), India’s Ministry of Finance only recently endorsed SEBI’s plea for direct access to service providers’ CDRs. In SEBI’s founding legislation, this capability is not mentioned. Very recently, however, the Ministry of Finance has decided to support expansion of current legislation in regards to CDR access for SEBI, the Reserve Bank of India (RBI), and potentially other agencies, when it comes to prevention of money laundering and other economic offenses.

SEBI’s Authority (Until Now)

Established in 1992 under the Securities and Exchange Board of India Act, SEBI was created with the power of "registering and regulating the working of… [individuals] and intermediaries who may be associated with securities markets in any manner."[1] Its powers have included "calling for information from, undertaking inspection, conducting inquires and audits of the intermediaries and self-regulatory organisations in the securities market."[2] Although the agency has held the responsibility to investigate records on market activity, they have never explicitly enjoyed a right to CDRs or other communications data. Now, with the intention of “meeting new challenges thrown forward by the technological and market advances,”[3] SEBI and the Ministry of Finance want to extend their record keeping scope and investigative powers to include CDR access, a form of communications surveillance.

But the ultimate question is whether agencies like SEBI need this type of easy access to records of communication.

What is the Importance of CDR Access?

Reports on SEBI’s recent expansion are quick to ensure that the agency is not looking for phone-tapping rights, which intercepts messages within telephonic calls, but instead only seeks call records. CDRs, in effect, are “metadata,” a sort of information about information. In this case, it is data about communications, but it is not the communications themselves. Currently, there a total of nine agencies which are able to make actual phone-tapping requests in India. But when it comes to access of CDRs, the government seems much more generous in expanding powers of existing agencies. SEBI, as well as RBI and others, are all looking to be upgraded in their authority over CDRs. Experts argue, however, that "metadata and other forms of non-content data may reveal even more about an individual than the content itself, and thus deserves equivalent protection."[4] Therefore, a second crucial question is whether this sensitive CDR data will feature the same detail of protection and safeguards which exist for communication interception.

One reason for the recent move in CDR access is that SEBI and RBI have found the process of obtaining CDRs too arduous and ill-defined.[5] Currently, under section 92 of the CrPc, Magistrates and Commissioners of Police can request a CDR only with an official corresponding first information report (FIR), while there exists no explicit guideline for SEBI’s role in the process of CDR acquisition.[6] Although the government may seek to relax this procedure, SEBI’s founding legislation prohibits investigation without the pretense of “reasonable grounds," as stipulated in section 11C of the SEBI Act.[7] It has always stood that only under these reasonable grounds could SEBI begin inspection of an intermediary’s "books, registers, and other documents."[7] With the government creating a way for SEBI and similar agencies to circumvent the traditional procedures for access to CDRs, these new standards should incorporate safeguards to ensure the protection of individual privacy. Banking companies, financial institutions, and intermediaries have already been obliged to maintain extensive record keeping of transactions, clients, and other financial data under section 12 of the Prevention of Money-Laundering Act of 2002.[8] But books and records containing financial data differ greatly from communication data, which can include much more personal information and therefore may compromise individuals’ freedom of speech and expression, as well as the right to privacy.

Significance and Responsibility in this Decision

Judging from SEBI’s prior capabilities of inspection and inquiry, this change may initially seem only a minor expansion of power for the agency, but it actually represents a significant transition in governmental leniency toward access to private records. As mentioned, the recent goal of the Ministry of Finance to extend rights to CDRs is resulting in amended powers for more agencies than only SEBI. Moreover, this power expansion comes on the heels of controversy surrounding America’s National Security Agency (NSA) amassing millions of CDRs and other datasets both domestically and internationally. There is obvious room for concern over Indian citizen’s call records being made more easily accessible, with fewer checks and balances in place. The benefits of the new policy include easier access to evidence which could incriminate those involved in financial crimes. But is that benefit actually worth giving SEBI the right to request citizen’s call records? In the cases against economic offenses, CDR access often amounts only to circumstantial evidence. With its ongoing battle against insider trading and other financial malpractice, crimes which are inherently difficult to prove, SEBI could have aspirations to grow progressively more omnipresent. But as the agency’s breadth expands, citizen’s rights to privacy are simultaneously being curtailed. Ultimately, the value of preventing economic offense must be balanced with the value of the people’s rights to privacy.

[1]. 1992 Securities and Exchange Board of India Act, section 11, part 2(b).

[2]. 1992 Securities and Exchange Board of India Act, section 11, part 2(i).

[3]. “Sebi Finalising new Anti-money laundering guidelines,” The Times of India, June 16, 2013

[4]. International Principles on the Application of Human Rights to Communications Surveillance -

[5]. “Sebi to soon to get Powers to Access Call Records,” Business Today, June 13, 2013

[6]. 1973 Criminal Procedure Code, Section 92

“Govt gives Sebi, RBI Access to Call Data Records,” The Times of India, June 14, 2013

[7]. 1992 Securities and Exchange Board of India Act, section 11C, part 8

[8]. 2002 Prevention of Money-Laundering Act, section 12