Analysts in India could be using the popular social media messaging app WhatsApp to send pre-earning results information, according to reports.
Earlier this month, Reuters reported that price-sensitive information about 12 companies had been disclosed in a WhatsApp group ahead of the results being published. The messages were sent before any official company announcements and, in some cases, included information about net profits, revenues and operating margins. The messages came from two different WhatsApp groups, according to Reuters.
‘The mere sharing of information that could be unpublished insider information is outlawed, even if you don’t misuse the information to trade on it,’ Sandeep Parekh, a lawyer with FinSec Law Advisors and former head of the enforcement division of the Securities and Exchange Board of India (Sebi), told Reuters.
Sebi has since contacted India’s top two stock exchanges – the National Stock Exchange of India and the Bombay Stock Exchange – and asked them to investigate whether these messages break insider trading and listings rules.
Sebi expanded its insider trading regulations in 2015 to cover any information that isn’t ‘generally available’. The regulation defines an insider as ‘anyone who is in possession of or having access to unpublished price-sensitive information’ regardless of how he or she came ‘in possession of or had access to such information’.
The term ‘generally available’ could be at the heart of this investigation, as Tejesh Chitlangi, partner at law firm IC Universal Legal, told Indian newspaper Mint.
‘Whether information is generally available or not would depend upon the nature of the platform,’ Chitlangi said. ‘For instance, a WhatsApp group is more private than a LinkedIn/Facebook group, which may be more widely open to public viewers. This would [have to be looked at] on a case-to-case basis, and Sebi and the stock exchanges would have a real task in hand to investigate and find the origin of the leak.’
WhatsApp is owned by Facebook. Its terms of service state that the platform can be used only for ‘legal, authorized and acceptable purposes’, Reuters reported.