Facebook-owned messaging app WhatsApp has reportedly refused to share user data with Securities and Exchange Board of India (SEBI) on grounds of privacy.
The latest development comes after the market regulator asked WhatsApp to provide information as to how earnings figures and other key financial details of 24 companies got leaked on the instant messaging app.
As per current regulations, WhatsApp is not obliged to share user-specific information with SEBI. However, if the company decides not to cooperate, the market regulator could take the matter to court against WhatsApp.
Doing so, however, risks infringement of personal privacy, sources close to the development have said. They added, “The root source of information can be very effective in zeroing down on the culprits. However, based on the response received from WhatsApp, it is clear that the social media firm is not keen to oblige.”
“Globally, there have been several cases where social media platforms have declined to share user-specific information with government agencies. These have often resulted in bitter legal battles,” people in the know further stated.
According to 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 Possession and circulation of unpublished price-sensitive information constitutes a violation of PIT regulations.
However, SEBI’s insider trading rules state that mere possession of unpublished financial information cannot be considered as wrongdoing. The violation is when actual trading happens on the basis of the leaked data.
Some experts fear that if SEBI manages to get hold of the specific user data on WhatsApp, it could set a precedent, prompting other government agencies to take legal help for similar cases.
A Brief Overview Of The Original Development
The matter goes back to November 2017 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 included 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.
Soon afterwards, SEBI wrote 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.
At the time, it was reported that SEBI and the exchanges were trying to find out if such information appearing on social networking sites violated insider trading regulations and listing regulations.
An unnamed official said at the time, “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.”
As part of the development, the market regulator also reportedly 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.
Past Controversies Surrounding WhatsApp
Both WhatsApp and Facebook, however, denied such allegations, stating that neither companies have shared any data with foreign entities.
According to senior advocate Kapil Sibal, who was representing WhatsApp, the only information that the messenger app has shared with its holding company Facebook pertains to the user profile picture, device details, last access details, and phone numbers.
WhatsApp currently collects user information through servers owned by third-party companies, sources have revealed. However, they remain completely encrypted, meaning that the information cannot be accessed anyone other than Facebook and Whatsapp.
Interestingly, WhatsApp’s Legal Info page clearly states, “Nothing you share on WhatsApp, including your messages, photos, and account information, will be shared onto Facebook or any of our other family of apps for others to see, and nothing you post on those apps will be shared on WhatsApp for others to see. We still do not allow third-party banner ads on WhatsApp.”
While the instant messaging platform is currently running a pilot of its digital payments feature in India, it has already been locked in a war of sorts with Paytm, with the latter claiming that WhatsApp has been trying to enter the country’s digital payments market through unfair means by flouting NPCI rules on UPI and deliberately restricting the service to its own 200 Mn users.