Mumbai: The Securities and Exchange Board of India (Sebi) on Friday conducted searches at 31 brokers and analysts in Mumbai, Delhi and Bengaluru, in connection with a WhatsApp leak of earnings and price-sensitive information before they were made public, said three people with direct knowledge of the matter, including a Sebi official.
“A team of 70 Sebi officials including people from the investigation, enforcement and surveillance conducted searches at the premises of brokers and analysts to gather information," said the Sebi official, requesting anonymity.
“Data devices such as mobiles, laptops, computers and other documents were seized for fact finding exercise. The investigation is to ascertain whether these brokers and analysts are violating provisions of insider trading, prevention of fraud and unfair trade practices (FUTP) rules and listing rules. The investigation is currently in the fact-finding stage or preliminary," said the second of the three people, declining to be identified.
Sebi conducted these searches under the search and seizure powers granted to it under the Sebi Act in 2014. Sebi is empowered to conduct searches, seize documents during investigations after obtaining permission from the Sebi special court.
“Sebi had sought the permission on Thursday," said the second person.
The issue surfaced on 17 November, 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 leakage of earnings and key company information on WhatsApp and other social media is a serious issue, Sebi chairman Ajay Tyagi said at an event a few days ago. In seven out of 12 companies whose financial details were leaked, the information was very similar to their actual earnings, he had said. “We have sought information from compliance officers of these companies," Tyagi added.
“Sebi with the searches and examination of the documents is trying to ascertain, whether the information on WhatsApp is close estimate of earnings or information has been leaked by insiders for gains. It is examination of technical data and may take sometime but we want to conclude the investigations as soon as possible," said the third person. “So far none of the company officials have been searched but they could come radar if the analysis connects these dots that price sensitive information did come from company insiders."
Under 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 violates PIT regulations.