Insider trading rules | Reckless WhatsApp forwarding can now get you into trouble with SEBI

Messaging or even simply forwarding stock advice could now land you in the soup as the Securities and Exchange Board of India (SEBI) has set a precedent to penalise the practise – regardless of monetary gains.

SEBI’s latest order comes after two senior employees of Antique Broking were fined Rs 15 lakh each for exchanging insider tips to institutional investors on several investor groups on WhatsApp. The trouble started when some predictions turned out to be accurate.

The duo posted several predictions for blue-chip companies such as Wipro, Axis Bank, Mindtree and Asian Paints, based on Unpublished Price Sensitive Information (UPSI) or publicly undisclosed information, The Economic Times reported. Doing this is an offence per SEBI norms, even if the parties involved do not make a profit.

Moin Ladha, partner, Khaitan & Co told the paper that trading regulations limit “direct or indirect communication of UPSI, irrespective of the same being relied upon for trading”, and involved parties must thus carefully consider further dissemination.

The rule of thumb applied in such situations – especially when all predictions may not have been accurate, is whether the information used for advice is “public knowledge” i.e. available in newspapers, TV or even social media posts. If information used to provide tips came from non-public sources such as personal messages, phone calls or closed WhatsApp groups, it will be treated as insider trading.

“The fact that SEBI penalised a person when it was not able to establish the link between such person and the original source of the UPSI, may appear to be unfair, but the regulations are clear,” said Jabarati Chandra, partner, S&R Associates told the paper.