The SEBI was established under an act of Parliament in 1992 in accordance with the provisions of SEBI Act, 1992. The main objective of SEBI as reflected in its preamble is to protect the interest of investors in securities and to promote the development of, and to regulate the securities market. The SEBI is thus a “Public Authority” as defined u/s 2 (h) of the RTI Act. The RTI Applications have flooded the SEBI which largely comes from that of investors who are victim of various fraudulent practices relating to the securities market, some of which are so gross that they even attract provisions of IPC or Information Technology Act, 2000 besides SEBI Act, 1992. The brokers or the market intermediaries who themselves are the perpetrators of the fraudulent practice would not supply the information and the investors look upon the SEBI as market regulator under whose regulatory regime the stock exchanges & broker falls. The SEBI has deep pervasive control over the stock exchanges under the various provisions of the Securities Contracts (Regulation) Act, 1956 as well as SEBI Act, 1992 which gives vast regulatory power to SEBI over stock exchanges. Moreover, the various judicial pronouncements show that the Stock Exchange is “State” or instrumentality of “State” under Article 12 of Constitution. Moreover, the SEBI itself in a RTI case has stated that ‘public authority’ is broader and more generic than the word ‘state’ under Article 12 of the Constitution of India. Therefore, the Stock Exchange being “State” is also “Public Authority” under the RTI Act. The Chief Information Commissioner accepting the contention of the SEBI held that Stock Exchange are public authority & directed them to put RTI mechanism in place which was upheld by the Hon’ble Delhi High Court.  The order of the CIC clearly directs the Securities and Exchange Board of India (Sebi) as market regulator to use its power pro-actively to seek information from market intermediaries to address investor grievances & ensure that stock exchanges function in a transparent manner, especially in respect of investor protection. However, the issue whether the Stock Exchange is public authority or not is still controversial and the pending adjudication before the Hon’ble Bombay High Court. However, the CIC in Bhojraj case has observed that the stay by the Bombay High Court on the issue whether the BSE is a “Public Authority” within the meaning of the RTI Act would not preclude the SEBI from accessing information from the Stock Exchange u/s 2(f) of the RTI Act.

In view of the aforesaid rulings, the SEBI as a market regulator endeavor to provide the information sought from it by the investors under the RTI Act, 2005 to ensure market transparency and fair play in the stock market. The rationale for bringing the bourses under the purview of the RTI Act is in fact very sound and cannot be questioned as the investor and client protection is an important function of SEBI as capital market regulator. Last but not the least, any denial of the information on the part of the SEBI would be against the very objective & Preamble of SEBI Act as well as the RTI Act. The information sought by the investing public with respect to their shares trades executed via brokers/stock exchanges relates to an public activity, are within the access of SEBI. The information sought by the investors should be provided by the SEBI by exercising its power under RTI Act over Stock Exchanges, which would go a long way to ensure transparency, integrity and accountability in the share market and the transparency of such information is vital in the larger interest of the investing public. The denial of such information in actual possession & within the reach of the SEBI would increase the incidents of share frauds as the fraudsters illegal activities in the stock market would not come to light being immune from the RTI Act which would harm the economic growth as public would lose faith in the stock market the working of which is of public nature and therefore, not good in the larger interest of investing public.

Neeraj Aarora

(Advocate)