WhatsApp leak case: Sebi dismisses insider trading charges against 11 entities

Markets regulator Sebi on Monday dismissed insider trading charges against 11 entities who allegedly circulated unpublished price-sensitive information about the financial results of Axis Bank through WhatsApp messages. The entities are -- Amish Arvind Malbari, Arvind Malbari, Amrish Suresh Vakil, Fanil Motiwalla, Kunaal Raman Khanna, Gaurav Girish Dedhia, Kotak Capital Partners, Hinglaj Enterprise, Nidhi Mehra, BharatKumar V Bagrecha, Mita Mahendra Shah and Roshan Vivian Saldanha, Sebi said in its order.

Last year, Sebi had disposed of the adjudication proceedings against two individuals in the case pertaining to alleged circulation of unpublished price-sensitive information (UPSI) about the financial results of half a dozen companies, including TCS and UltraTech Cement.

The orders came after the Securities Appellate Tribunal (SAT) had set aside Sebi's insider trading charges against certain individuals in the WhatsApp leak case in March 2021 and the same was upheld by the Supreme Court on September 26 last year.

The case pertains to the circulation of UPSI in various private WhatsApp groups about certain companies, including Axis Bank, ahead of their official result announcements to the stock exchanges.

Subsequently, the regulator carried out an investigation in the matter of circulation of UPSI of Axis Bank to ascertain any violation of PIT (Prohibition of Insider Trading) norms during June-July 2017.

During the investigation, the regulator observed that Axis Bank's results for the quarter ended June 2017 were announced by the private lender on the exchanges, but before the announcement certain figures related to the results were circulated on WhatsApp.

It was alleged that Malbari, Vakil, Motiwala, Khanna, Dedhia had circulated the results of Axis Bank on WhatsApp and are being treated as 'insiders', whereas Kotak Capital, Hinglaj, Mehra, Bagrecha, Shah and Saldanha had traded in the scrip of the firm while in the possession of the UPSI and violated the provisions of insider trading norms.

In its order, Sebi disposed of insider trading charges against the 11 entities.

"I find that the allegations levelled against the entities in the present matter do not sustain. Consequently, the charge of violating PIT norms levelled against the entities Malbari, Vakil, Motiwalla, Khanna and Dedhia being insiders, having communicated the UPSI to Kotak Capital, Hinglaj, Mehra, Bagrecha, Shah and Saldanha who in turn is alleged to have traded in the shares of the firm while in possession of UPSI is also liable to be dropped," Sebi's Adjudicating Officer Sahil Malik said.

In 2017, some news reports referred to the circulation of UPSI in various private WhatsApp groups about certain companies ahead of their official result announcements.

Against that backdrop, Sebi had initiated a preliminary examination in the matter during which search and seizure operations against 26 entities of a WhatsApp group were conducted, and about 190 devices and records, among others, were seized.

WhatsApp chats extracted from the seized devices were examined and it was found that earnings data and other financial information of around 12 companies were allegedly leaked through the messages.