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‘Mutual friends on Facebook’ presented as evidence in insider trading case by SEBI

stock market

The Securities and Exchange Board of India (SEBI) presented ‘mututal friends on Facebook’ as evidence to establish a connection between suspected individuals indulging in an insider trading case. SEBI frequently keeps tabs on social media of  suspected individuals as part of the investigation, but this is the first case where it was presented as evidence.

In an order on insider trading of shares in Palred Technologies (PTL), SEBI ordered the impounding of unlawful gains of over Rs 2 crore from 15 individuals. Suspects in the case included Palem Srikanth Reddy (CMD of Palred Technologies), Ameen Khwaja (common director in a merged entity) and Pirani Amyn Abdul Aziz. “Pirani Amyn Abdul Aziz is also found to be connected to Mr. Ameen Khwaja through mutual friends on ‘Facebook’,” the order read.

Aziz was employed with Deloitte Tax Services India Pvt. Limited, a subsidiary of Deloitte Touche Tohmatsu.

SEBI’s probe had showed that the entities had traded shares between September 2012 and November 2013 on the basis of unpublished price sensitive information of the slump sale of Palred Technologies’ software division. Deloitte Tax Services had conducted the due diligence of the slump sale.

“His trading pattern was found in deviation from the established trading pattern,” SEBI said. Aziz had invested Rs 5 lakh in Palred Technologies’ shares on June 25, 2013, one day before the slump sale. “The above discussion, suggests that Pirani Amyn Abdul Aziz had traded on the PSI (price sensitive information) regarding the scrip of PTL. In view of the same, he can also be considered to be an ‘insider’,” SEBI added.

SEBI guidelines on social media

In April 2013, SEBI was also looking to issue guidelines to companies on the use of Facebook, Twitter and social media for the dissemination of information to client. SEBI also plans to hire staff to sift through social media for stock market tip offs that could impact the stock prices before official announcements.

SEBI had similarly warned investors about investing based on SMS tips and also about their employees using blogs, messaging service and forums to offer unsolicited tips in 2011.

Image credit: Travel Aficionado under under CC BY 2.0

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