Sebi tells HDFC Bank to probe leakage of results on WhatsApp

The Securities and Exchange Board of India (Sebi) has directed HDFC Bank to conduct an internal probe into the leakage of financial results before their disclosure to stock exchanges.

The capital markets regulator has asked the country's largest bank by market value to identify individuals, including bank officials, responsible, as it has found inadequate controls at the lender as the ''prima facie'' reason for the leak.

The case relates to sensitive financial details of various companies, including HDFC Bank, getting leaked on WhatsApp before their official announcement. Sebi is investigating the leak of the bank's earnings, which were doing the rounds on WhatsApp groups operated by market traders before the results were announced.

In its order on Friday, Sebi said, "Such leakage is prima facie attributable to the inadequacy of the processes / controls / systems that HDFC Bank as a listed company had put in place."

''The same could not have been possible without leakage of information from the persons, who were privy to the information relating to financials prior to its official announcement," said whole-time Sebi member Madhabi Puri Buch in the order.

In December last year the regulator had in a similar ruling ordered Axis Bank to strengthen its systems and conduct an internal probe after finding that the company's results for the June 2017 quarter were "either identical or matched closely with the figures" that were in circulation on WhatsApp prior to an official announcement.

Sebi has directed HDFC Bank to submit a report on the present systems and controls and how they have been strengthened, who are the persons responsible for monitoring such systems and the periodicity of monitoring.

"HDFC Bank shall conduct an internal inquiry into the leakage of unpublished price sensitive information relating to its financial figures including NPA (non-performing asset) results and take appropriate action against those responsible for the same, in accordance with law," the order said.

The regulator said the scope of inquiry should not be limited to the role of persons, including members of committees involved in generation of the original data for the purpose of determination of key figures pertaining to financial figures including gross non-performing assets (GNPA).

It said the purview of inquiry should also go beyond those involved in the consolidation of the figures for the financial results, preparation of board notes and presentations as well as dissemination of information relating to financial results in the public domain.

HDFC Bank has to complete the inquiry within three months and file a report to Sebi within seven days thereafter, the regulator said.

Sebi had initiated a preliminary examination in the matter, during which it observed that in respect of HDFC Bank, the messages circulated on WhatsApp closely matched the quarterly financial results of HDFC Bank for June 2017 which were published subsequently.