Sebi launches nationwide raids over confidential info on WhatsApp

The Securities and Exchange Board of India (Sebi) used recently-acquired powers to carry out search and seizure operations involving at least 35 analysts and stock brokers in connection with the leak of sensitive corporate information through WhatsApp and other social media.

Laptops and mobile phones were seized in searches conducted at multiple locations. According to BusinessLine's sources, the operation was targeted at a specific group that circulated financial numbers of companies through WhatsApp messages ahead of the official declaration of the last quarter's results.

Media reports had highlighted last month that a few market analysts had leaked company results and circulated them on WhatsApp. Sebi found that the results of over a dozen companies were leaked ahead of their official announcement. Raids were carried out in Mumbai, Delhi and Bengaluru. Nearly 100 officials from Sebi and the police were deployed for the raids.

It is only the second time that the stock market regulator has used its powers to conduct a search-and-seizure operation. Earlier, Sebi had conducted raids on Dabba or bucket traders a couple of years ago.

WhatsApp messages are encrypted and Sebi has no surveillance power. Therefore, the modus operandi used by the regulator was to search specific people on the basis of information, according to BusinessLine.

Following the arrest of an analyst working for a Mumbai-based brokerage house, Sebi seized his phone and initiated an inquiry against those in his WhatsApp group. The analyst is believed to have told the investigators that most of the messages he sent were forwards from other people. Sebi also interrogated the senders to and the recipients of the said analyst.

Last month, SEBI had initiated a probe against companies including Dr Reddy's, Cipla, Axis Bank, HDFC Bank, Tata Steel, Wipro and Bajaj Finance. Others were Mahindra Holidays and Resorts, Crompton Greaves Consumer Electricals, Mindtree, Mastek and India Glycols.

Sources said Sebi had also has been probing key company officials from the above list and had even interrogated them in the past few weeks as confidential financial details of their company was being circulated on WhatsApp.

According to The Times of India, over a dozen stocks are being monitored where Sebi suspects foul play as data related to earnings as well as other market-moving information is believed to have been shared.

The regulator had only recently got search and seizure powers after the law governing the market regulator was amended.

Circulation of unpublished price-sensitive information and trading based on such information in the securities market is prohibited under the Sebi insider trading regulations.

Market players believe that it will not be easy for Sebi to prove wrongdoing, as obtaining further evidence may be tough.

The government on Friday informed Parliament that Sebi was examining the matter about leakage of business details of companies through WhatsApp.