SEBI fined an analyst Rs 15 lakh for sharing unpublished price-sensitive information about Asian Paints on WhatsApp. The regulator ordered the fine on Monday on a Neeraj Agarwal. In an earlier order in April, SEBI had fined Agarwal, and another analyst, Shruti Vora, the same amount each for sharing price-sensitive information about Ambuja Cement.

In November 2017, Reuters published a report about Indian “Market Chatter” groups on WhatsApp, where many companies’ financial results were released early, and matched the actual results almost exactly. SEBI’s investigation into the groups, launched after Reuters’s report, led to these orders. SEBI obtained evidence in the case by seizing Vora’s iPhone, which contained the WhatsApp messages. WhatsApp told SEBI that it would not be able to trace the origin of the messages due to end-to-end encryption. The regulator noted that due to this constraint as well as the fact that messages were deleted, it was not able to trace who the originator of the messages in this case was.

However, SEBI proceeded with the investigation by designating Agarwal as an insider, and said it did not matter who the source of the information was to make this designation. Agarwal claimed that he was using publicly available brokerage data, but SEBI countered that the brokerage estimates he referred to had multiple analysts’ guesses, and Agarwal picked estimates that were close enough to the published results to be deemed insider information. Agarwal also used a free speech argument, saying “What was being circulated was mere opinion on what could be the prospective financial results and such opinion is protected speech under Article 19  of the Constitution of India. Merely because an opinion expressed turns out to be true does not mean that the said opinion suddenly changes nature and becomes insider information.”

“I am of the opinion that Noticee’s submission seeking benefit of doubt citing such minor technical disparities cannot be accepted, given the gravity of the alleged violation in the instant case and accordingly I note that the information forming part of the circulated WhatsApp messages by the Noticees was exactly same as that of the subsequently announced financial results,” SEBI’s adjudicator BJ Dilip wrote in the order.

In 2017, we pointed out how SEBI faced an uphill climb in front of it in investigating such groups. But it seems the regulator has gone ahead by aiming instead to make an example of people forwarding the information with fines on any user in the information chain, meaning it’s no longer just the initial insider who is at risk — these orders are meant to signal that any person receiving and forwarding market “predictions” that turn out to be true is at risk of sanction. “If the same is allowed to continue in the pretext of sharing of market gossip as stated by the Noticee, the insiders having access to the [unpublished price-sensitive information] would be granted themselves [sic] with an unfettered mode of transmitting such information without having to be concerned about being tracked back to the source of the information,” Dilip wrote.