WhatsApp earnings leaks: Sebi summons officials of at least 12 companies

Firms asked to make submission in writing; these include Dr Reddy's, Cipla, Axis Bank, HDFC Bank, Tata Steel, Wipro, Bajaj Finance

The Securities and Exchange Board of India (Sebi) has summoned at least 12 companies over prescient messages, mostly related to their quarterly results, being circulated on social media platforms such as WhatsApp.

According to sources, each company’s secretary and chief financial officer have been asked to be present in person before the regulator to make a submission in writing about who all had access to the quarterly results and the method used for disseminating price-sensitive information within the company.

“We are trying to ascertain who had information beforehand about the company earnings and how they could have got leaked in advance,” said a regulatory official in the know.

Company officials were asked to explain what measures they had taken so far to ensure that such things do not occur in future, the official said.  Further, the Sebi is said to have sought an explanation on messages about upcoming bonus share issues or revenue guidance. 

“This is a serious issue and can have a large impact on the markets and small investors,” said the official cited above. 

The matter emerged on November 17, when Reuters identified 12 companies whose September quarter earnings were being circulated on various private WhatsApp groups. These companies included Dr Reddy’s, Cipla, Axis Bank, HDFC Bank, Tata Steel, Wipro and Bajaj Finance. The other five were Mahindra Holidays and Resorts, Crompton Greaves Consumer Electricals, IT services providers Mindtree and Mastek, and India Glycols, a petrochemicals company.

After this report, Sebi Chairman Ajay Tyagi said on the sidelines of an industry event that the regulator was investigating the matter. 

Meanwhile, the exchanges are said to have suggested to these companies to come out clarifications on their quarterly earnings. Their clarifications should state whether the reports of leaks were “incorrect and misleading”, an exchange official said.  

According to him, the matter had also been taken up at the Sebi’s “Committee on Fair Market Conduct”, an expert panel formed to suggest measures to improve market surveillance and prevent insider trading and manipulation.

According to a PTI report dated November 21, the regulator was also considering seeking call data records of all the people involved in the alleged circulation of key financial details about listed companies on social media groups before they were made public.

Under the Sebi’s Prohibition of Insider Trading rules, disclosing any unpublished price sensitive information (UPSI) and trading on the information is forbidden. 

Last year, the Sebi had floated a consultation paper to curb unauthorised investment tips through social media. Under this, it proposed curbing unsolicited investment advice and promotion of investment products through electronic and broadcasting media platforms. Besides, the watchdog sought greater checks and balances for online investment advisory services and the use of automation or robotic tools.

The proposed norms — part of the consultation paper on amendments/clarifications to the Sebi (Investment Advisers) Regulations, 2013 — however, were widely criticised by some sections. The Sebi is yet to pass the final guidelines.

This is not the first time the market regulator has faced the challenge of curbing unauthorised activity in the securities market directly or indirectly. The Sebi, through its various circulars, has constantly warned investors not to be swayed by such tips. In another case, stock tips going around, claiming to be coming from renowned brokers and appear authentic with some minor changes in the brokerage’s name. 

Regulator’s diktat for companies
 

• Submit information about people in possession of price sensitive information

• Provide personal details, including name and address, of those who have access to quarterly results beforehand

• What measures have you taken till date to curb such leak of information

• Concerns raised on the data leaked matching with actual numbers 

• Observed the revenue guidance leaked was in line with actual numbers