August 09, 2020
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'The Suspension Is Unjustified'

The first woman to be elected to the BSE board, Deena Mehta feels SEBI's decision to suspend all broker-directors of the exchange will not stop insider trading. Excerpts from an interview to Outlook:

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'The Suspension Is Unjustified'
On the suspension: It's totally unjustified. sebi's charge seems to be merely that some member-directors were present when some information was being obtained by a broker office-bearer. In fact, a meeting was under progress with the brokers' forum to discuss the turnover tax issue. Just because we were doing some work in (Anand) Rathi's chamber, we have been suspended!!

On interference by broker directors: It is established that Rathi's phone call ended at 3.16 pm by when the market had already fallen. So the allegation of using the information to trigger a fall is unjustified. Interference, as I understand, means preventing staff from performing their duties. After enquiries on the reasons of the fall, I don't see how the surveillance members were prevented from performing their duties. In fact, sebi has stated that the board would oversee the functioning of the surveillance department. The fall was very unusual and hence inquiries were made by Rathi. There is no interference in any manner by any of us. In fact, the present board has introduced the new surveillance system, boss, and it had all the security features which included taping all conversations in the room.

On why Rathi sought the information: I can't comment on Rathi's reasons for seeking the information. However, whenever there is a sharp fall in the market, all board members and especially the president get phone calls about the reasons behind the fall.

On the BSE's future: It's not proper to say anything against broker-directors on the board or absence thereof as a reason for problems in the exchange. What matters is whether we have a preventive and corrective system. I assure you that the bse has adequate systems, like a state-of-the-art surveillance department. Also, going by the logic, after suspension of all broker-directors, the market should never be volatile in future nor will there ever be "insider trading". Who's guaranteeing that? What is the guarantee that so-called professionals will not indulge in malpractices? I think preventive and redressal systems are needed, coupled with persons of knowledge to do so.

On the BSE probing price rigging: I don't have all the statistics but I have myself referred over a dozen cases in the last one year based on investor and broker complaints. I understand information is called from the broker regarding the trades under investigation. Client details are called for, but they aren't within the bse's purview. So, after the investigation is complete, cases are handed over to sebi. In the past few years, over 1,000 cases would have been initiated for investigation by bse.
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