WhatsApp case: Sebi asks Bata India to probe results leak, strengthen systems

Markets regulator Sebi today ordered Bata India to strengthen its systems and conduct an internal probe to fix responsibility after its initial investigation found leakage of price sensitive information related to the firm's quarterly financial ahead of official release.
Bata India has to complete the inquiry within three months and file a report with Sebi within seven days thereafter, the regulator said, adding that the financial figures pertaining to the October-December quarter 2015 of the firm were matching with those that were in circulation prior to official announcement.
After Axis Bank, HDFC Bank and Tata Motors, Bata India is the fourth company related to whom the regulator has passed an order in the high-profile case of leakage of sensitive financial details prior to formal announcement of quarterly results.

Sebi had launched a probe in November after media reports surfaced with respect to circulation of unpublished price sensitive information in various private WhatsApp groups about certain companies, including several bluechip firms, ahead of their official announcements.
In a four-page order, Sebi said at this stage, the source/ origin of the leakage of unpublished price sensitive information (UPSI) cannot be ascertained.
It said it can prima facie be inferred that the UPSI relating to financials of Bata India was leaked.

"Such leakage is prima facie attributable to the inadequacy of the processes/ controls/ systems that Bata India as a listed company had put in place," Sebi said.

Noting that while procurement or communication of UPSI by any person is identified as a violation of PIT Regulations, Sebi said it becomes incumbent upon every listed company to "put in place processes/ controls/ systems that would ensure that such procurement or communication of UPSI does not take place".
Apart from directing Bata India to "strengthen its processes/ systems/ controls" forthwith to ensure that such instances of leakage of UPSI do not recur in future, Sebi also asked the firm to conduct an internal inquiry into the leakage and take appropriate action against those responsible for it.
Sebi said the inquiry should include determination of the possible role of persons in relation to leakage of UPSI including those involved in generation of the original data for the purpose of determination of key figures pertaining to financial figures.

Besides, the probe would also cover the persons involved in the consolidation of the figures for the financial results, as also those involved in the preparation of board notes and presentations and in dissemination of information relating to financial results in the public domain.
According to the order of the Securities and Exchange Board of India (Sebi), the role of any other person who had access to the information also has to be probed.