Sebi identifies 34 in WhatsApp earnings leak case

This is first case where Sebi has conducted such a massive operation against big firms

The Securities and Exchange Board of India (Sebi) is said to have identified 34 people in the WhatsApp earnings leak case. The regulator has launched a massive “search and seizure” operation on persons directly or indirectly connected to the blue-chip companies whose earnings got leaked.

According to a regulatory official, these 34 people are company executives, brokerages, and entities who allegedly gained out of the leaked price-sensitive information. 

Sources say this is the first case where Sebi has conducted such a massive operation against big firms. About 30 Sebi officials and 70 policemen were deployed for the search operation in Mumbai. 

“We have seized digital devices at all premises and brought them to the Sebi office. We are in possession of crucial documentary proof, which could help us in cracking the case. We are going to continue further enquiries in the matter,” said the official cited above. According to the official, the regulator will conduct forensic audit of all the seized documents, laptops, and mobile phones, which are suspected to be involved in the fraudulent activity. 

Sources say the regulator will primarily focus on probing breach of Sebi’s Prohibition of Insider Trading (PIT) norms.

If they find some other violation, they could refer the case to enforcement agencies like the income-tax department. 

Last month, the regulator had initiated a probe against a dozen firms (including Dr Reddy’s, Cipla, Axis Bank, HDFC Bank, Tata Steel, Wipro and Bajaj Finance) for the alleged leak of sensitive information before being made public. The others were Mahindra Holidays and Resorts, Crompton Greaves Consumer Electricals, Mindtree, Mastek, and India Glycols.

On November 17, Reuters had reported that September quarter earnings of these 12 companies were circulating on various private WhatsApp groups. Under PIT rules, disclosing any unpublished price-sensitive information and trading on this is forbidden.

Last week, the regulator had summoned senior officials of all the 12 companies. They were asked for explanations on what had happened and what they had done to stop a recurrence.

Sources say Sebi identified the five companies after examining 12-month trade data. During the preliminary probe, it was found that leaked information such as net profit figures, gross sales and operating profit of some of these firms were closely matching the actual earnings. 

Subsequently, the regulator is said to have approached cybercrime experts. However, experts believe it would not be an easy job to trace the original sender. “It is difficult to track the original sender or creator of these messages. This is because WhatsApp messages are end-to-end encrypted,” said a state police cybercrime specialist.

Story so far

• Sebi initiates probe after 12 firms’ earnings were leaked on WhatsApp 
• Regulator summoned company officials, sought information on the leak 
• Officials being asked to provide details of persons who are in possession of price-sensitive info
• After analysing information, the market regulator identified five companies and decided to probe them further
• Leaked earnings of these five companies closely matched actual earnings 
• Sebi conducts massive search operations; seizes digital devices of 34 people