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SEBI widens net in WhatsApp probe

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As many as 40 listed companies could come under the scanner of the Securities and Exchange Board of India (SEBI), as it probes the alleged leak of price-sensitive information on WhatsApp groups by individuals and whether companies and their officials are also involved in the matter.

As part of its investigations into various chat groups, the capital market regulator has found references to almost 40 companies, with discussions ranging from corporate results, potential deals, scheme of arrangements, regulatory approvals and other important announcements, said a person familiar with the matter.

The probe relates to individuals — analysts, brokers, investment advisors and company officials — sharing key information – unpublished price sensitive information (UPSI), in technical parlance – on WhatsApp groups before such information is disclosed to the stock exchanges, as per the regulatory requirement.

“The evidence that SEBI has received till now shows that not only financial information has been shared, but also tip offs related to forthcoming preferential allotment, block deals, demerger, stock splits or bonus issues, court case updates and buybacks have been shared before the same has been announced to the stock exchanges,” said a person on condition of anonymity as the investigation is still on.

Further, companies like Jubilant Life Sciences, Coal India, Glenmark Pharmaceuticals, Century Textiles Industries, CESC, Cipla, LIC Housing Finance, Yes Bank, Zee Media Corporation, Maruti Suzuki India, JSW Steel and Sun Pharmaceutical Industries regularly featured in the discussions in some of the chat groups that are under the regulatory scanner.

R.S. Loona, managing partner of Alliance Corporate Lawyers, said that not only financial numbers, but any kind of information that could have a material impact on the performance and financials of the company was considered as UPSI, and action could be taken against entities trying to take advantage of such information.

“The platform does not matter. The fact remains that someone has leaked price sensitive information (before disclosing it on stock exchanges) and someone has traded based on that. The insider trading regulations and also the listing regulations clearly bar such actions,” said Mr. Loona, who earlier worked at SEBI as an executive director in charge of the legal department.

Incidentally, SEBI conducted search and seizure operations on December 22 across 34 locations, seizing documents, computers and even mobile phones as evidence from individuals alleged to be part of these chat groups.

Sumit Agrawal, partner, Suvan Law Advisors, and a former SEBI law officer, is of the view that the regulator will have to expand the investigations to companies to dig deeper and find the roots of the matter.