'It's time capital market-related news on the Web was monitored'

It's high time that capital market-related information on the Web was monitored." This is what L K Singhvi, senior executive director, Securities and Exchange Board of India, believes emphatically. Recently, SEBI held a meeting on Internet surveillance where matters related to restrictions on capital market-related Web sites were discussed.

Although the discussions and decisions of this Internet surveillance group are still in a very preliminary stage, Singhvi is confident that the modalities will be worked out soon enough.

Once the regulations are in place, there will be no escaping for the dot-coms. "We did see certain information on a Web site which was incorrect. It is time we did something about it," stresses Singhvi in a tête-à-tête with Kanchana Suggu.

What prompted SEBI to decide on surveillance and enforcement over the Internet?

The whole idea is that on the one hand, the Internet is a medium which provides a broader access to the investors, the market becomes more transparent and the cost of transaction comes down considerably. The investor has free access to information and at the same time the Web accords him anonymity. It can make things move very quickly.

If you disseminate any information, the news can spread and it can be accessed by a large section of people immediately. In the case of press releases, news usually gets reported only on the next day, whereas this is on real time basis. Things spread very quickly when the trading activity is going on.

Yet, these very advantages of the Internet can turn into disadvantages if people want to misuse the system.

Was any information you saw on the Web that was misleading?

Yes, we have seen certain information which was not quite correct. It could have been intentional or unintentional. I don't want to name anyone specifically here. But, yes, we have observed certain news reports appearing on a site and certain information which was not correct. If it was done deliberately by them to mislead the market or to influence the decision of the investors, it can create problems. We do come across certain news items on Web sites' bulletin boards also.

When exactly did SEBI decide that trading activities should be monitored?

When we thought of permitting Internet trading itself, that is about 6-8 months ago. At that stage itself, we decided that we should have certain guidelines for the Web sites, but we did not activate anything because trading had not started in such a big way then. It's only now that Internet trading is coming up.

What kind of Web sites in particular are these guidelines applicable to?

This applies to whoever has relevance to the capital market area, to Web sites providing trading facilities. This could also apply to investment advisors. Presently, we don't have regulations for investment advisors.

Australia and Hong Kong already have regulations. Regarding monitoring columnists who provide advice to investors, I would say that we have not thought about that yet. But the issue is under examination, there is no finality.

What methods of increasing investor education is SEBI looking at?

It could be through the medium of Internet or otherwise, but you have to educate the investors. These are various issues under examination and consideration. We are planning to come out with certain standards of practice which anyone who wants to provide information on the Net has to follow. The idea is to have some set of standards for content providers. Putting up disclaimers is one of the ways.

Also investor education through press, publications, seminars to let investors know more and more are being considered. People should not see information on the Net as sacrosanct. Checks and balances have to be there.

Ultimately, Internet is only a medium. Core activities can be done physically or through phone or even fax. The use of Internet has come up only now, but the basic things remain the same. So the types of malpractices that happen in the physical world, can happen here also, but with a slight difference. This medium is fast, pervasive, anonymous and doesn't believe in global boundaries. It has certain advantages as well as disadvantages.

Do the existing cyber laws already cover any of the points brought out by your guidelines?

I can't talk like an expert on cyber laws. But I think that cyber laws are more of a legal framework related to transactions, digital signatures and other legal implications. A law comes into picture only at the final stage. First you have to develop your tools and these tools are really sophisticated, you require expertise to trace from where the whole thing is originating. You have to be well versed with aspects of technology.

What stage has the Group on Surveillance and Enforcement for Internet Trading reached? How long will it be before the final draft of the guidelines are ready?

We are still in a very preliminary stage. This was just the first meeting. We will have the next meeting shortly.

What is the size of the group?

The group consists of people from the IT industry like Kalpathi Suresh from SSI, others from KPMG, ICICI, Ernst & Young and also from NSE and BSE. We are about 10-12 people and I am the co-ordinator of the group.

What were some of the main concerns discussed in the first meeting?

In the last meeting, we decided that content on the Internet should be subject to certain standard practices. When any information is seen on the Net, it should be made very clear as to who is providing that information. Lot of sites have bulletin boards and chat rooms, which people visit.

Any person accessing a site, should not think that the information is true and authentic. Content should be placed in such a way that the person who is putting it up should be should be apparent to the visitors of the site. Disclaimers should come saying that this is just an opinion of someone. It may not be authentic. There should be some audit, so that you can trace the person who in the first place has put any misleading information.

How is the scene on Internet surveillance like internationally?

Internationally also, Internet activity, trading and other Internet services have taken some shape already. These things do get noticed and other regulators like US's SEC have been trying to examine the whole issue and find out certain regulatory requirements of disclosures and disclaimers. They are trying to come up with certain standards and practices, so as to minimise the possibility of manipulation.

Recently, SEC filed a case against a minor, a 15-year-old boy who was trading. He was involved in putting up wrong news. Simultaneously, he used to also trade in about 6-7 stocks and in the process made a profit of $300,000. The SEC of course, made him give back all the money. He was manipulating by spreading wrong information on the Internet.

Our endeavour is to standardise the procedure and make it completely transparent.

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