Will the exercise of its search and seizure powers prove costly to Sebi? Sebi had conducted raids on premises of several brokers and market entities on December 22 in the course of its investigations into the premature leak of unpublished price sensitive information of listed companies on WhatsApp a few days ago. Several mobiles, laptops were seized by the regulator during the raid.
However, this act could lead to tough legal proceedings against Sebi as stated by few lawyers, as Sebi’s entitlement to investigating individual social media accounts is not yet established. In this context, Sebi Chairman, Ajay Tyagi agreed that there was no precedence into investigating social media accounts for suspected illegal activity but he further emphasized that market entities could not use it as a shield for the same.
A few lawyers, former officials of Sebi revealed that one of the biggest challenges that could come Sebi’s way from the raided brokers was ‘violation of privacy rights’. This reason could hold true in view of the judgment given by the apex court of the country stating individual privacy to be a fundamental right of every citizen. Once the case holds good on grounds of privacy issues then the time frame involved for its resolution would be pretty long.
Lawyers clarified that Sebi would definitely need to prove that messages circulated on WhatsApp by brokers under scrutiny constituted ‘unpublished price sensitive information’. Under the norms of insider trading, ‘unpublished price sensitive information’ is defined as information, which is not ‘generally available’ and one which could have impact on markets.
Taking resort to this, it was possible for individuals to term the circulated information as being ‘generally available’ or refer to it as common market speculation.
In the context of circulation of this financial information, Axis Bank which was one of the 12 companies whose information had got leaked was ordered by Sebi to strengthen its internal processes and take action against suspected persons.