Securities and Exchange Board of India (Sebi) on Thursday pulled up Axis Bank for the alleged leak of its June quarter earnings on social media platform WhatsApp. The market regulator said its preliminary examination showed “the messages circulated on WhatsApp groups almost matched with the quarterly financial results of Axis Bank for June 2017, which were published subsequently".
Sebi has directed Axis Bank to initiate an internal probe into the leak and submit its finding to the regulator within three months. The regulator has said inquiry should determine the people who could be responsible for the leak. It has also asked the private sector lender to “strengthen its processes, systems, controls” to ensure that such leaks are not repeated.
Axis Bank spokesperson didn’t offer any comment immediately on the Sebi order.
Market observers said Sebi’s four-page order on Axis Bank will send a strong signal to the market when it comes to the handling of price sensitive information.
“It will send out a stern message to all wrongdoers who might involve in the leaking of such price sensitive information. Sebi has acted swiftly and proactively which is good enough sign of its seriousness towards such matters. We expect that company would do a fair job by appointing some experts to do the inquiry against the offenders as directed by the regulator,” said Amit Tandon, founder and managing director of Institutional Investor Advisory Services (IIAS), a proxy firm.
The issue of earnings leak on WhatsApp group was first reported in an investigative report by news agency Reuters. The report had named 12 companies whose earnings were circulated in advance. Some of the companies named in the report were Dr Reddy’s, Cipla, HDFC Bank, Tata Steel, Wipro and Bajaj Finance. The market regulator is said to be examining four more companies, besides Axis Bank.
G Mahalingam, Sebi's whole time member, in Wednesday’s order, highlighted that the financial metrics such as loan write-offs, net performing asset (NPAs), current account saving amount (CASA) closely for Axis Bank closely matched with the actual earnings figures.
“It was observed that the figures that were in circulation in WhatsApp groups about Axis Bank were either matching in totality or were close to the actual announcements,” said Mahalingam in the order.
Sebi had asked Axis Bank to submit information regarding the process and controls it follows for handling price-sensitive information. The lender told Sebi that it “has ensured adherence to the applicable laws and has adopted adequate process and controls to maintain confidentially”.
Explaining the timing of the earnings, Sebi said that the actual results of Axis Bank were announced at stock exchanges on July 25 at 16:23 hours. While the messages were in circulation same day since 9:12 am.
“Such resemblance of the information circulated in the WhatsApp groups prima facie indicates that the financial figures of the bank were in circulation prior to official announcement/publication by Axis Bank. The same could not have been possible without leakage of information from the persons, who were privy to the information relating to financials prior to its official announcement,” said Mahalingam, who was the executive director of Reserve Bank of India (RBI) prior to joining Sebi.
Sebi said it has not yet been able to ascertain the source or origin of the leak. But further said it can be prima facie attributable to the inadequacy of the processes, controls and systems at the bank.
Sebi has directed Axis Bank to initiate an internal probe into the leak and submit its finding to the regulator within three months. The regulator has said inquiry should determine the people who could be responsible for the leak. It has also asked the private sector lender to “strengthen its processes, systems, controls” to ensure that such leaks are not repeated.
Axis Bank spokesperson didn’t offer any comment immediately on the Sebi order.
Market observers said Sebi’s four-page order on Axis Bank will send a strong signal to the market when it comes to the handling of price sensitive information.
“It will send out a stern message to all wrongdoers who might involve in the leaking of such price sensitive information. Sebi has acted swiftly and proactively which is good enough sign of its seriousness towards such matters. We expect that company would do a fair job by appointing some experts to do the inquiry against the offenders as directed by the regulator,” said Amit Tandon, founder and managing director of Institutional Investor Advisory Services (IIAS), a proxy firm.
The issue of earnings leak on WhatsApp group was first reported in an investigative report by news agency Reuters. The report had named 12 companies whose earnings were circulated in advance. Some of the companies named in the report were Dr Reddy’s, Cipla, HDFC Bank, Tata Steel, Wipro and Bajaj Finance. The market regulator is said to be examining four more companies, besides Axis Bank.
G Mahalingam, Sebi's whole time member, in Wednesday’s order, highlighted that the financial metrics such as loan write-offs, net performing asset (NPAs), current account saving amount (CASA) closely for Axis Bank closely matched with the actual earnings figures.
“It was observed that the figures that were in circulation in WhatsApp groups about Axis Bank were either matching in totality or were close to the actual announcements,” said Mahalingam in the order.
Sebi had asked Axis Bank to submit information regarding the process and controls it follows for handling price-sensitive information. The lender told Sebi that it “has ensured adherence to the applicable laws and has adopted adequate process and controls to maintain confidentially”.
Explaining the timing of the earnings, Sebi said that the actual results of Axis Bank were announced at stock exchanges on July 25 at 16:23 hours. While the messages were in circulation same day since 9:12 am.
“Such resemblance of the information circulated in the WhatsApp groups prima facie indicates that the financial figures of the bank were in circulation prior to official announcement/publication by Axis Bank. The same could not have been possible without leakage of information from the persons, who were privy to the information relating to financials prior to its official announcement,” said Mahalingam, who was the executive director of Reserve Bank of India (RBI) prior to joining Sebi.
Sebi said it has not yet been able to ascertain the source or origin of the leak. But further said it can be prima facie attributable to the inadequacy of the processes, controls and systems at the bank.
No comments:
Post a Comment