Sebi moves to plug leakages on WhatsApp groups
TIGHTER OVERSIGHT Companies may be told to change how they handle pricesensitive information
MUMBAI: Markets regulator Sebi is weighing tighter oversight to check leakage of privileged company information in the wake of unpublished financial results finding their way into WhatsApp groups, two people familiar with the development said.
MUMBAI: The markets regulator is weighing tighter oversight to check leakage of privileged company information in the wake of unpublished financial results finding their way into WhatsApp groups, two people aware of the development said.
Officials at the Securities and Exchange Board of India (Sebi) have suggested that companies frame a policy on how to handle unpublished price-sensitive information, or UPSI, and convey the policy to employees; monitor big share price changes before important events like earnings releases; conduct background checks on employees dealing with such information; identify people involved in major deals and ensure information given to junior or external teams is on a need-to-know basis; and create separate work spaces with secured access for those preparing and discussing issues that are price-sensitive.
“These measures have been suggested by Sebi officials who are part of a panel on “fair market conduct”. The panel has four subcommittees and is expected to submit a report next month to the regulator, said the first of the two officials cited earlier. Sebi formed the committee, led by former law secretary T K Viswanathan on, August 1, 2017 to review its rules on insider trading and unfair trading practices. Sebi did not respond to an email seeking comment sent on Friday.
Yet, the regulator is still considering the possibility that the leaks could be a systemic issue, not a company-specific one.
“Close to 24 companies are under probe and in the four coming Sebi chairman Ajay Tyagi. The regulator is still considering the possibility that the leaks could be a systemic issue panies where the regulator has passed orders, the facts and circumstances are same that the leaked information mirrored the results. So, there is an assessment that it could be a systemic issue,” said the first person. This does not mean these companies will be let off the hook, he added.
So far, Sebi has passed orders against Axis Bank Ltd, HDFC Bank Ltd, Tata Motors Ltd and Bata India Ltd, asking them to conduct an internal inquiry and strengthen systems.
After the order, the four companies announced they would comply with the regulator’s directive.
The regulator and the Viswanathan panel are also considering changes to the so-called model code of conduct, said the second of the two people cited earlier. The code was drafted by Sebi in May 2015, adopting a principles-based approach, moving away from the previous tick-box approach. All the companies then drafted new policies based on the code, includ- Axis Bank, HDFC Bank and Tata Motors. The code includes the principles a company must follow to prevent insider trading and leakage of price-sensitive information.
“This (rule changes) also assumes importance as most of the companies under (WhatsApp) probe have so far not identified the source of the leak,” he said. In the case of Bata India, the firm has informed Sebi that it has confirmations from auditors and employees that they did not discuss the financial results with any third party.
In a report on March 9, KPMG India said companies need to control the number of employees with access to privileged information, while junior employees privy to such confidential data should also be kept under the scanner.
According to Mukul Shrivastava, partner, fraud investigation and dispute services, EY India, companies need to identify, relook at or reinvent their internal policies to mitigate leakage of price-sensitive information. MUMBAI: UltraTech Cement Ltd, the Aditya Birla group company that has lost a bid to acquire Binani Cement Ltd, has challenged the sale of the cement maker to rival Dalmia Bharat Ltd, alleging lack of transparency in the bidding process.
“The creditors of Binani Cement have overlooked important aspects of the resolution plan submitted by us and have hastily decided to approve the sale to Dalmia for reasons best known to them,” Atul Daga, chief financial officer at UltraTech Cement, said in an interview.
“We fail to understand the reasons behind approving the sale to Dalmia, although we had made the highest bid,” Daga said. “Isn’t the committee of creditors responsible for looking after the interests of all stakeholders?”
UltraTech has now challenged the sale to Dalmia Bharat at the National Company Law tribunal (NCLT), and the matter is scheduled to be heard on Monday at the Kolkata bench of the tribunal.
On March 16, a committee of Binani Cement creditors approved the resolution plan from a consortium led by Dalmia Bharat Ltd.
The Dalmia Bharat consortium had bid about ₹6,350 crore ($978 million) and had offered close to a 20% stake in Binani Cement to its lenders.
Dalmia Bharat proposed to make the Binani Cement investment through an equal joint venture with India Resurgence Fund, which is backed by Bain Capital Credit and Piramal Enterprises Ltd.
Mint had reported on February 19 that both UltraTech and Dalmia had submitted bids of roughly around ₹6,000 crore each, with included upfront cash payments, as well as an offer of close to 20% stake in Binani to lenders.
Although Dalmia Bharat’s bid was marginally higher, UltraTech had raised the offer by ₹700 crore, taking its overall offer above ₹7,000 crore.
Mint had reported on February 16 that UltraTech was specifically asked by the creditors to provide information on a Competition Commission of India (CCI) penalty, which is a contingent liability on the company.
In 2016, CCI had imposed a penalty of ₹1,175.49 crore on UltraTech.
This was part of an overall penalty of ₹6,700 crore on 11 cement companies, including UltraTech, ACC, Ambuja Cements Ltd, Ramco Cements Ltd and JK Cement Ltd, as well as industry body Cement Manufacturers Association for indulging in cartelisation.
UltraTech approached the Competition Appellate Tribunal (COMPAT) against the order, which stayed it.
“We were told that our bid was not being considered because of the contingent liability following the CCI order,” said Daga.
“Even before we revised the bid higher, the difference in score between us was marginal, but lost out as creditors unilaterally decided that we will not get the Competition Commission of India approval for the deal,” Daga added.
On February 23, UltraTech had approached the Competition Commission of India, seeking an approval in the event of it acquiring Binani Cement.
Dalmia Bharat, too, had made a similar request to CCI. Binani Cement is a unit of Binani Industries Ltd (BIL).