The Securities and Exchange Board of India (SEBI) has asked India’s top two stock exchanges—NSE and BSE Ltd—to write to over 24 companies whose earnings figures as well as other key financial information were leaked ahead of their earnings announcement on WhatsApp and social media.
As per sources aware of the matter, SEBI and the exchanges are trying to find out if such information appearing on social networking sites violates insider trading regulations and listing regulations. An unnamed official told an English media daily, “The exchanges have observed discrepancies in trade data, prompting bourses to seek clarification from the companies on the data leaks. We are examining the trade data of these companies for the past 12 months.”
The issue came to light on 17 November, when a Reuters report identified 12 companies whose second quarter earnings were being circulated in private WhatsApp groups. Nearly half of these companies were part of Nifty 50. The companies under scanner include Dr. Reddy’s, Cipla, Axis Bank, HDFC Bank, Tata Steel, Wipro, Bajaj Finance, Mahindra Holidays and Resorts, Crompton Greaves Consumer Electricals Ltd, Mindtree Ltd, Mastek Ltd, and India Glycols.
SEBI Chairman Ajay Tyagi told Reuters that the market regulator is “investigating the matter and it is work in progress”.
Additionally, SEBI has also asked BSE and NSE to beef up their surveillance of other social media platforms such as Facebook, LinkedIn to see if any of these are being used for leaking earnings price-sensitive information.
As per SEBI’s Listing Obligation and Disclosure Requirement (LODR) and Prevention of Insider Trading (PIT) regulations, price-sensitive information needs to be uniformly disclosed through stock exchange platforms. Possession and circulation of unpublished price-sensitive information constitutes a violation of PIT regulations.
In this direction, last year SEBI had proposed a ban on sharing trading tips and stock-specific recommendations through bulk messages, emails, blogs and social media such as WhatsApp, Twitter and Facebook, unless one is registered as an investment adviser. The regulator stated that the general public was lured by the tips and their investment decisions were influenced by messages that solicit investments and promise unrealistic returns. It has also raised its investor awareness drive to prevent the public from falling to scams and to boost retail investment in financial markets
Also, India had strengthened its insider trading rules in early 2015, to include what material constitutes “unpublished price-sensitive information” to include “any information” that is not “generally available” and that could have a market impact.
As social media becomes more prevalent and more and more data makes its way to the Internet, data leaks are becoming a common thing. In India, this year, many cases of Aadhaar data leak have been hogging headlines. In this light, stringent steps need to be taken by concerned authorities to wrest further such incidents. As per reports, SEBI is also considering seeking call data records (CDRs) of all the persons involved in the alleged earnings leak of listed companies on WhatsApp before they were made public. Such a step would enable the regulator to keep in check in if insider trading norms are being violated through data sharing on WhatsApp.