SEBI must crack the whip

Suresh P Iyengar | Updated on March 09, 2018

Inside information is shared in company meetings with brokers

Capital market regulator SEBI has acted fast to crack down on a bunch of brokers and analysts who were found discussing the quarterly results of companies even before they were made public. GoogleChat and WhatsApp are the preferred platforms for these discussions.

SEBI has seized hoards of laptops and mobile phones in the search conducted at multiple locations. But this will not make any difference as the well-heeled broking community still meets regularly at posh hotels and other locations after market hours to discuss ‘inside information’. Then they collude to execute their strategy, usually over the week, to reap rich dividends. The spoils are distributed mostly in cash. Some broking firms present ‘exclusive’ reports on expected financial numbers, especially of FMCG, steel and cement companies, based on their production. Though cement companies have stopped giving their monthly production numbers, broking firms collate them by speaking to dealers. The accuracy of these numbers makes one wonder who prepared the financial results first — the analysts or the CFO. The market regulator also cracked down on SMS-mongers.

Instead of taking intermittent and half-hearted measures leading nowhere, SEBI should stop the practice of broking firms meeting company officials privately. In fact, going by the announcements made to exchanges, the number of direct meetings between company officials, institutional investors and large broking firms are on the rise. Taking transparency to a different level, some top blue chip companies put out the presentation made to institutional investors on the exchange website. But what transpired at the meeting is anybody’s guess. Of late many companies have found it convenient to meet the people who can move up their stock price rather than face the fourth estate. While discussions with the media have been limited to concalls, it is a wonder how MDs and CFOs go all out to make presentations to a select few. Will SEBI crack the whip? Only time will tell.

Senior Assistant Editor

Published on December 28, 2017

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