WhatsApp earnings leak case: Axis Bank appoints agency to help with probe

Action to be taken based on the outcome of investigation: Lender

Private lender Axis Bank has appointed an external agency to probe the alleged leak of its June quarter earnings on social media platform WhatsApp. 

Sources said the private sector lender had appointed one of the Big Four accounting and audit firms to conduct a free and fair inquiry.

Confirming the development, an Axis Bank spokesperson said, “The matter is under investigation and we are working with one of the leading experts in the field. Based on the outcome of the investigation, appropriate action, if necessary, shall be taken.”

Last month, the Securities and Exchange Board of India (Sebi) had directed Axis Bank to conduct an internal probe and submit the findings within three months. The bank would need to conclude investigations by March and submit the report on actions taken to the regulator.

“The probe and the report will be important. Sebi has to be convinced that genuine efforts have been made by the bank to hold the wrongdoers responsible and improve its systems and controls,” said a source, adding, “This matter has become critical and Sebi wants to send a message to the market at large that handling of price-sensitive information can’t be taken lightly.” 

In an order dated December 27, the market watchdog pulled up Axis Bank for the earnings leak. Sebi had raised concerns as its preliminary examination showed financial results of Axis Bank circulated on WhatsApp groups matched the actual numbers.

The regulator want the inquiry report to determine the people responsible for the leak and state the actions taken to strengthen processes, systems, and controls to avoid such leaks.

On December 22, Sebi had conducted searches on 31 brokers and analysts in Mumbai, allegedly connected with the leak of earnings and price-sensitive information before they were made public. The market regulator examined all the electronic devices such as laptops and mobile phones which they have recovered during its search operation. 

Sources say the entire process is going to be challenging for the regulator as it would be difficult to establish the allegations. Also, the encryption technology of WhatsApp would be a roadblock.

“Sebi has sought a forensic auditor’s help to further examine the communication trails and also the unlawful gains, if any, made due to earning leaks in advance,” said a person privy to the development. Besides Axis Bank, three-four companies are under lens, he said.

The issue of earnings leak on private WhatsApp groups was first reported in an investigative report by news agency Reuters. The report had named 12 companies whose earnings were circulated in advance. Some of them named were Dr Reddy’s, Cipla, HDFC Bank, Tata Steel, Wipro, and Bajaj Finance.

Sebi in a circular said it had not yet been able to ascertain the source or origin of the leak, but added it could be prima facie attributable to the inadequacy of the processes, controls and systems at the bank.