SAT sets aside SEBI orders in WhatsApp leak case

The Securities Appellate Tribunal (SAT) has set aside market regulator Securities and Exchange Board of India's (SEBI) orders against some employees of brokerage houses for forwarding messages on WhatsApp regarding unpublished quarterly results of some listed companies.

SEBI had carried out search and seizure operations of 26 entities of a specific market chatter WhatsApp group and seized about 190 devices and records in case of leak of quarterly financial results of some companies before the official disclosure by the companies. As per SEBI, earning data and financial information were leaked in case of about 12 companies, including Bajaj Auto, Bata India, Ambuja Cements, Asian Paints, Wipro and Mindtree.

The employees of broking firms charged by SEBI argued that they were not the originator of the messages, but had simply forwarded the messages as received from some other sources.

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SAT said SEBI was unable to find the source of the messages due to the constraints of end-to-end encryption policy of the messenger. The regulator also couldn't find any leakage of information from the concerned teams related to the respective companies.

"Upon hearing both the sides, in our view the order cannot be sustained...," SAT said in its order dated March 22, adding that out of hundreds of messages mined by SEBI, the numbers matched exactly only in six cases pertaining to the order.

SAT said a generally available information cannot be construed as an unpublished price sensitive information. "The information can be branded as an unpublished price sensitive information only when the person getting the information had a knowledge that it was unpublished price sensitive information."

"...in our view the respondents (SEBI) failed to prove any preponderance of probabilities that the impugned messages were unpublished price sensitive information, that the appellants knew that it was unpublished price sensitive information and with the said knowledge they or any of them had passed the said information to other parties," the tribunal said.

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