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NSE phone tapping case: Sebi, EY India may also face CBI heat

While Sebi conducted a probe into alleged irregularities related to the NSE co-location facility, EY had been hired to carry out an audit of the exchange in the aftermath of the scam. Both the organisations failed to investigate the award of contract to iSec Services Pvt. to conduct a “periodic study of cyber vulnerabilities” at the NSE.

ET Now Digital

Updated Jul 10, 2022, 09:09 IST

New Delhi: After the CBI booked former top brass of the National Stock Exchange, led by Chitra Ramkrishna and Ravi Narain, as well as erstwhile Mumbai police commissioner Sanjay Pandey over the alleged illegal tapping of phone calls between 2009 and 2017 used by the bourse’s employees, Sebi and ET India may also come under the scanner of the agency

The Central Bureau of Investigation is looking out whether the illegal phone taps involved acts of omission or commission on the part of the bourse, markets regulatory Securities and Exchange Board of India and audit firm EY India, according to people in the know of it.

The alleged spying on NSE staff had come to light during investigations into alleged irregularities related to the co-location facility at the bourse. The markets regulator conducted a probe into the matter, while EY had been hired by the bourse to carry out an audit of the exchange in the aftermath of the scam.

Sebi, EY and iSec Services Pvt. probe

Both the organisations skipped a probe into the award of contract to iSec Services Pvt., a firm floated by Pandey, for conducting a “periodic study of cyber vulnerabilities” at the bourse under a Rs 4.45 crore contract. The firm is said to have carried out the snooping.

Neither Sebi nor EY could come across any illegal monitoring of phone lines between 2009 and 2017, Economic Times quoted people aware of the development as saying. It is worth stating here that phone monitoring can only be done by designated government agencies.

The NSE failed to mandate the audit firm to carry out a thorough investigation into iSec Services and didn't inform the capital market regulator about the alleged illegal practices carried out at the bourse, the people said.

While NSE hired iSec Services to carry out "periodic study of cyber vulnerabilities", CBI officials said that the actual purpose was to snoop on employees to find out if they were passing on information about the co-location issues or discussing it among themselves.

Audit of brokerages

Meanwhile, another Rs 8 crore contract was handed out to the firm carry out an audit of brokerages. The ED had come across the transcripts of taped conversation during the course of its money laundering probe. According to an official, the CBI found the transcripts along with a server and laptops used as a part of the surveillance mechanism.

The phone tapping stopped in 2017 when the co-location scam broke out. In 2019, it disposed of the surveillance set up by iSec Services as e-waste, which amounts to destruction of evidence. The exchange will be quizzed on whose behest was the disposal ordered, the official added.

Now, the CBI is investigating charges of cheating and criminal conspiracy against former NSE and Sebi officials as well as certain brokerages in the co-location case.

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