SEBI swoops on stock traders to crack WhatsApp leak case

Palak Shah Mumbai | Updated on January 27, 2018

Group allegedly put out companies’ results prior to their official announcement

Markets regulator SEBI on Friday launched a massive crackdown on dealers and analysts at stock-broking firms, seizing laptops and mobile phones in searches conducted at multiple locations. 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, two sources close to the development told BusinessLine.

Media reports had highlighted last month that a few market analysts had leaked company results and circulated it on WhatsApp. During its investigations, the Securities and Exchange Board of India (SEBI) found that the results of a dozen-odd companies were leaked ahead of their official announcement. SEBI conducted search-and-seizure operations against 35 people, confiscating their official and personal laptops and mobile phones. Raids were carried out in Mumbai, Delhi and Bengaluru, the sources said. Nearly 100 officials from SEBI and the police department were deployed for the raids.

It is only the second time that SEBI 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, the sources said.

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, the sources said.

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 included 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.

SEBI did not reply to an email from BusinessLine but an official said the operation would continue for two days. SEBI Chairman Ajay Tyagi had recently said the regulator would be probing instances of insider-trading and front-running via use of WhatsApp and other social media.

Published on December 22, 2017

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