Securities and Exchange Board of India (SEBI) announced on Tuesday that it expects Tata Motors Ltd to investigate on the leak of financial results for the quarter end (October-December) 2015 on Whatsapp ahead of its official release.
Tata Motors is expected to complete the probe within three months and submit a report to SEBI within seven days, the board said. This decision comes after SEBI’s investigation against the automaker company revealed that the figures circulating on Whatsapp prior to the formal release of financial results were matching the actual numbers.
In reaction to the announcement by SEBI, a spokesperson from Tata Motors said, “Tata Motors would like to state that it is fully committed to ensuring confidentiality of such price sensitive information. This lapse pertains to an incident in 2015. While the company has robust policies and processes to manage such price sensitive information, we will investigate this lapse thoroughly to identify and address process gaps and fix accountability.”
Sebi found out that while the December quarter results of Tata Motors were announced at 3:16 PM on 11 February 2016, important financial data were already circulating on specific Whatsapp groups as from 12:29 PM of that day. The probe also revealed that the Whatsapp messages announced the company’s quarterly revenue as Rs 72,256 Crore while the official release revealed the figures at Rs 72,256.40 Crore. The company’s margins that were leaked on Whatsapp was 14.20% while the genuine figure stood at 14.17%. The net profit of the company was also circulating on the instant messaging platform.
“The messages circulated in Whatsapp matched with the quarterly financial results of the company for 31 December 2015, which were published subsequently,” said the SEBI order. Before adding, “Such resemblance of the information circulated on WhatsApp with the actual financial results prima facie indicates that the financial figures of Tata Motors, were in circulation prior to official announcement/ publication by Tata Motors.”
The SEBI Prohibition of Insider Trading Regulations, 2015, stipulates that information cannot be shared unless under the legal obligation or if obliged by order to perform such duties. Any leak or exploitation of a registered firm’s data by an entity prior to the official release of the company relating to exchange and trading based on the procured information amounts to insider trading and is thought to be a serious violation of securities market laws.
The SEBI is in authority of taking adequate actions against any financial institution found guilty of making trades with the intention of generating profits from unreleased information about a company listed on the stock market.
Tata Motors Ltd. is now the third company to receive a SEBI order on cases relating to the leak of high-profile financial information on Whatsapp. SEBI has passed similar orders against HDFC Bank Ltd on 23 February and Axis Bank Ltd on 28 December.
Tata Motors is now expected to submit a report pertaining to the role of the members of the boards involved in the generation of the original figures to determine the source of the leak. Tata said the preparation of financial results for the quarter end of 2015 initially started on 15 January 2016. Statutory auditors then received the financials. After which, the investor relations department obtained the company’s financial results from the accounting team. The financials were finally presented in an audit committee meeting carried out on 9 February 2016. The results were then officially shared on 11 February 2016 at 15 16.
The market regulator is now ordering the company to review its existing processes, policies, and controls to avoid any leakage of unauthorized price sensitive information (UPSI) in future. As such, no entity will be able to take benefits out of the advantageous information and trade in the company’s shares to make immoral market profits and not respecting SEBI’s insider trading norms.
Finally, Tata Motors is asked to make an internal investigation in the leakage of the information and take appropriate actions against those responsible, in front of the law. The inquiry must include those involved in generating the figures of the financial results and their possible involvement and roles in the leakage. The request states that anybody who had access to the information should be investigated.