Loan default disclosure information has been leaked by insiders.
SEBI faces many challenges to pin down the original company insiders responsible for these leaks.
What is SEBI’s Loan default disclosure?
SEBI required listed firms to inform exchanges if they default on loan payments to banks and financial institutions.
By new definition SEBI made it clear, even a delay of one day from the due payment of loans will be considered as default.
The move came against the backdrop of the government and the Reserve Bank of India (RBI) stepping up efforts to tackle the menace of bad loans amounting to over Rs. 8 lakh crore.
What was leak about?
Many price sensitive information relating to defaults of major companies listed in Indian stock exchange were been circulated in WhatsApp groups.
This leak was happened prior to the public announcement of quarterly results.
According to Indian laws mere sharing of unpublished information is illegal and anyone possessing it is an ‘insider’.
Many insider analysts shared prescient tip-offs about upcoming results for top listed companies.
On this regard SEBI has interrogated analysts, conducted raids on stock brokers and deployed search-and-seizure powers to confiscate laptops and mobile phones.
What are the difficulties in addressing insider leaks?
In this case, the leaks were already a few months old, and the WhatsApp messages were encrypted, which is tedious for the regulator to track.
In India, this means breaking the cosy nexus between managements of listed companies and analysts who track them.
It is a common practice for companies to host exclusive analyst conference calls immediately after key actions, where the management shares a detailed break-down of numbers and fields one-to-one questions.
Going strictly by insider trading laws, the transcripts of all such interactions should be placed immediately in the public domain.
But in practice, companies inordinately delay or even skip the filing, resulting in significant information asymmetry between the selected analysts and other public investors.
India’s premier stock exchanges are yet to deploy their tech and data-mining capabilities to address such leaks.
