Public Comments on Listing Process Using UPI Affects 'Economic Interest' of India: SEBI
Moneylife Digital Team 27 November 2018
Market regulator Securities and Exchange Board of India (SEBI) says information sought under Right to Information (RTI) Act, or public comments on a discussion paper on revisiting the public issue process using unified payment interface (UPI), cannot be disclosed as it may harm the economic interest of the country. 
Refusing to provide information asked for by Hyderabad-based Srikanth, the market regulator says, "...disclosure of such strategic and confidential information and information received in fiduciary capacity would affect and compromise the interest of the securities market in specific and may impact the economic interests of the country."
On 10 July 2018, a proposal was placed before the primary market advisory committee (PMAC) of SEBI for deliberation in its meeting. The PMAC recommended  the  use  of  UPI with  the facility of  blocking  funds,  as  new payment mechanism for investment in initial public offerings (IPOs) and the consequent reduction of timeline from issue closure to listing from T+6 days to T+3 days.
Based on PMAC's recommendation, a discussion paper was prepared and placed on the SEBI website on 26 July 2018 for public comments. "More than 60 comments were received from various entities including banks, merchant bankers, stock exchanges, stock brokers, investors, on various aspects of the discussion paper and are placed at Annexure-II," SEBI says in a memorandum published on its website on 1 October 2018. This memorandum is published under the SEBI board meeting held on 18 September 2018.
However, the page for annexure II is blank with a message "this has been excised for reasons of confidentially". (see image below)
SEBI told Srikanth, "The information sought (under the RTI) is highly confidential in nature and discloses the mind of the regulator and affects the strategic decision making of the regulator as a whole. In view of the above, the information sought by you is exempted under section 8(1)(a) and 8(1)(d) of the RTI Act. The information, which can be publicly disclosed has already been disclosed in the public domain vide board agenda for the board meeting held on 18 September 2018, which is available at the below given link 
Interestingly, the memorandum in the SEBI board meeting, clearly says, “The public comments are broadly in agreement with the proposed change, with suggestions with respect to procedural aspects, such as, SMS / email intimation to investors for bid and block of funds, facility to view investor bid details at the time of authorising the block, which SEBI may take into consideration while implementing the proposed mechanism.”
Srikanth, however, says, “The dangers of centralisation of data has not been studied in the context of IPO and retail investor and access to public consultation comments is essential to gauge if these were considered by the regulator before approving the change.”
UPI is a centralised payment system with a variety of intermediaries like payment service providers (PSPs), technology partners of the bank and a private settlement and clearing agency National Payment Corp of India (NPCI) owned collectively by banks. “Any mandate approval creates a log with PSPs, bank and all such mandates are held by NPCI. It is trivial to get data on subscription rate, by calculating mandate processing instructions. This exposes retail investor sentiment measurement to a private settlements company,” he added.
Srikanth, has now filed his first appeal. He contended that since public comments by definition are public in nature, they cannot be treated as confidential. "Transparency in regulation making is essential to measure regulatory accountability," he says.
Over the past several years and across legal forums, usage of 'fiduciary relationship' to deny information has been ruled out. The traditional definition of a 'fiduciary' is a person who occupies a position of trust in relation to someone else, therefore requiring him to act for the latter's benefit within the scope of that relationship.
Even Moneylife was forced to fight a hard battle with SEBI to get data on portfolio management services, which was denied by the market regulator citing fiduciary information. Our request for information on PMS under the RTI Act was repeatedly rejected until we approached the Central Information Commission (CIC).
Chief Information Commissioner (CIC) Satyananda Mishra, in his order on 17 January 2012, stated, "By publishing such information about all Portfolio Management Services (PMS) regulated by it, SEBI would serve two objectives. One, help the investing public to access all information at one place and not have to visit 50 different websites and, two, eliminate the need for seeking such information under RTI, from time to time”. (Read: Power of RTI: CIC directs SEBI to disclose all information related to PMS)
Explaining the concept of fiduciary, noted chartered account, trainer and author Vinod Kothari says, "It is also necessary that the principal character of the relationship is the trust placed by the provider of information in the person to whom the information is given. An equally important characteristic for the relationship to qualify as a fiduciary relationship is that the provider of information gives the information for using it for the benefit of the giver. All relationships usually have an element of trust, but all of them cannot be classified as fiduciary."
"It is surprising and unfortunate to find that on being requisitioned, the authorities generally take the ground that the information is being held by them in a fiduciary capacity...whatever information the authorities have, it is because they have power to seek the information under the law, rules, and proceedings and not because the information provider provided the information for safe keeping," he added. (Read: Disclosure of fiduciary information under Sec 8 (1) (e) of the RTI Act: This is the true scope of the exclusion clause)


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