Mumbai: India’s top two stock exchanges—National Stock Exchange of India Ltd and BSE Ltd—have written to over a dozen companies whose earnings figures as well as other key financial information were leaked ahead of their earnings announcement, said three people aware of the matter, including an exchange official.

This comes after the market regulator Securities and Exchange Board of India (Sebi) asked them to examine trade data of 24 companies whose earnings were circulated on messaging app WhatsApp and social media.

The regulator and exchanges are trying to find out if such information appearing on social networking sites violates insider trading regulations and listing regulations.

“The exchanges have observed discrepancies in trade data, prompting bourses to seek clarification from the companies on the data leaks. We are examining the trade data of these companies for the past 12 months," an official at a stock exchange said on the condition of anonymity.

Emails sent to Sebi, NSE and BSE on Friday were not answered till press time.

“In addition, in a communication sent to the exchanges last week, the regulator has also asked BSE and NSE to beef up their surveillance of other social media such as Facebook, LinkedIn and whether these platforms are being used to leak price-sensitive information," said the second of the three people cited earlier.

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.

Soon, Sebi charmain Ajay Tyagi, on the sidelines of an industry event, said the regulator is “investigating the matter and it is work in progress".

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 Possession and circulation of unpublished price-sensitive information violates PIT regulations.

“The term ‘insider’ is very widely defined under the regulations to even include persons who are in possession of any form of Unpublished Price Sensitive Information or UPSI. The manner in which a person gets to know about such information is immaterial, even though it is unintended. Once insider, any communication even sans the trading will still lead to a violation," said Tejesh Chitlangi, partner at law firm IC Universal Legal.

“While the regulator and exchanges are trying to stem circulation of price-sensitive information, it would be a tall task to pinpoint an insider and prove that the information being circulated is UPSI," said the third of the three people quoted earlier in the story.

“With respect to leakage of such information on social networking platforms, the important question still remains that whether such information can be construed to be “generally available" or not. If generally available to public, then the subsequent communicators/traders cannot be termed as insiders," said Chitangi.

“Whether information is generally available or not would also depend upon the nature of platform. For instance, a WhatsApp group is more private compared to a LinkedIn/Facebook group, which may be more widely open to public viewers. This would depend on a case-to-case basis, and Sebi as well as stock exchanges would have a real task in hand to investigate and find out the origin of the leak," he added.

According to a PTI report published on 21 November, the regulator is also considering seeking call data records (CDRs) of all the persons involved in the alleged circulation of key financial details about listed companies on social media groups before they are made public.

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