The Securities and Exchange Board of India (SEBI) raided 34 locations on Friday, aimed at members of a particular WhatsApp group, as part of a probe into alleged leak of sensitive financial information by analysts and company officials over social media.
Documents seized
According to a person familiar with the development, almost 100 officers from the investigation, surveillance and enforcement divisions of SEBI along with the local police conducted search and seizure operations at the offices of brokers and investment advisers, primarily in Mumbai and Delhi, seizing documents, computers and even mobile phones as evidence.
“Two days back, SEBI had got search warrants issued against 34 entities who were part of a WhatsApp group on which price sensitive information was alleged to have been shared,” said the person on the condition of anonymity.
“Some of the admins of the WhatApp group also came forward and shared the chat records with SEBI that led to today’s action. The group also comprised some officials of a private sector bank and a private insurance entity,” he added.
It is believed that the raids were against members of a group known as ‘Market Chatters Group,’ however it could not be independently confirmed. An email query to SEBI remained unanswered till the time of going to press.
Such select sharing of information by companies or even analysts is barred under the current regulatory norms and SEBI can issue show-cause notices to companies and even analysts alleged to be involved in such activities.
While it is widely known that restricted groups on WhatsApp and Facebook are used to discuss price sensitive information, SEBI’s actions will send strong signals that sharing of such information would attract the ire of the regulator, said Sumit Agrawal, partner, Suvan Law Advisors and a former SEBI law officer.
“The first-of-this kind step by SEBI will make the regulator realise the kind of conversations that are taking place in the industry as the U.S. SEC also recently did,” he said.
“SEBI, however, also needs to tread carefully as being a member of a group without any trade or further tipping someone may not be chargeable for insider trading. A quick conclusion of the investigation and clearing the names will avoid troubles of such innocuous members, else these unusual sensational raids will become one more file in the SEBI office,” said Mr. Agrawal.
At a recent capital market seminar, SEBI Chairman Ajay Tyagi had said that the regulator had received complaints about instances when such information was allegedly shared between individuals in a select group before the same was disclosed to the stock exchanges and that it was “seriously” examining the matter.
“We are taking that (WhatsApp leaks) very seriously. How come such messages about reputed listed companies are leaked quite close to the financial results is something we are not going to sit quietly on,” Mr. Tyagi had said.
