Background:
SEBI initiated an examination in the matter of circulation of Unpublished Price Sensitive Information (UPSI) during the period of 1st January, 2016, to 10th February, 2016, through WhatsApp groups. During this search and seizure operation for 26 entities of Market Chatter WhatsApp Group were conducted, and approximately 190 devices, records, etc., were seized. The WhatsApp chats extracted from the seized devices were examined further, and it was found that in respect of around 12 companies whose earnings data and other financial information was leaked on WhatsApp.
Unpublished Price Sensitive Information (UPSI):
According to SEBI (PIT) Regulations, 2015, “unpublished price sensitive information” means any information relating to a company or its securities, directly or indirectly, that is not generally available which upon becoming generally available, is likely to materially affect the price of the securities and shall, ordinarily including but not restricted to, information relating to the following:
- financial results
- dividends
- change in capital structure
- mergers, de-mergers, acquisitions, de-listings, disposals and expansion of business and such other transactions
- changes in key managerial personnel; and
- material events as per the listing agreement
The information relating to financial results of Bata India Ltd for the quarter ended 31st December, 2015, was observed to be a Price Sensitive Information (PSI), which came into existence on 01st January, 2016. The corporate announcement of unaudited financial results for the quarter ended 31st December, 2015, was made to the exchanges (BSE and NSE) by Bata on 10th February, 2016. Therefore, the period from 01st January, 2016, to 10th February, 2016, was considered as the period of UPSI (unpublished price sensitive information).
Insider:
According to SEBI (PIT) Regulations, 2015, “insider” means any person who is:
- A connected person, or
- in possession of or having access to unpublished price sensitive information
SEBI had established that since Mr. Aditya Omprakash Gaggar was in possession of the UPSI, he was an ‘insider’.
SEBI investigation:
SEBI’s investigation found that:
- Mr. AOG, among others, had communicated the UPSI related to Bata India Ltd. viz; Sales, PAT and EBITDA for QE December 2015 through WhatsApp messages. From the WhatsApp chat of Ms. Shruti Vora on 10th February 2016, a chat was observed stating., “Bata hearing pat of 44 vs 43 expectation Ebitda 80 crs vs mkt exp of 73 crs Sales 617 vs exp of 601 crs” received from him.
- It was observed that the financial results of Bata India Ltd., were communicated through WhatsApp group namely “Market Info” of which Ms. SV was also a member, prior to their announcement and they closely matched with those disclosed subsequently by Bata India Ltd. on stock exchanges. The group consisted of 74 other members.
- Therefore, it was alleged that Mr. AOG had communicated UPSI related to Bata India Ltd. viz; Sales, PAT and EBITDA for QE December 2015, to other persons through WhatsApp message, which is prohibited and thereby acted in violation of the provisions of Section 12 A (d) & 12 A (e) of the SEBI Act, 1992 and Regulation 3 (1) of SEBI (PIT) Regulations, 2015.
- Show cause notice was sent to both, by SEBI, and they also filed a reply on the same. They defend themselves by taking the plea that there was no connection established between Mr. AOG and the officers of Bata India Limited. The reply also said that Mr. AOG did not buy any shares of Bata India Limited, and no leak regarding the same was established from insiders.
- Another interesting fact that was established was that Mr. AOG receives such market-related info on a daily basis from various groups and forwards the same to his clients and friends. Mr. AOG said that he had no idea that such information could be UPSI. Still, SEBI held that since Mr. AOG encounters such market-related information daily, he should be aware that such information relating to crucial financials is in fact UPSI.
- SEBI appointed an Adjudicating Officer and held a hearing. However, it was ruled by the Adjudicating Officer that all evidence proves that both accused had violated the SEBI regulations.
Monetary penalty levied:
A penalty of Rs.15,00,000/- was imposed on Mr. AOG and Ms. SV each in terms of the provisions of Section 15G of the Securities and Exchange Board of India Act, 1992 for the violation of Sections 12 A (d) & 12 A (e) of the Securities and Exchange Board of India Act, 1992 and Regulation 3 (1) of SEBI (Prohibition of Insider Trading) Regulations, 2015. They have to remit the penalty to SEBI in 45 days.
