WhatsApp earnings leak: Sebi must monitor insider trading on social media

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The Securities and Exchange Board of India will investigate possible leaks of company earnings in social media chatrooms after a Reuters investigation documented at least 12 cases of prescient messages about major Indian companies being posted in private WhatsApp groups. This author explains why Sebi should try to create means of observing this medium and others like it.

A recent Reuters news report identifies a dozen messages that accurately predicted Q2 earnings patterns (and a bonus announcement in one case) for specific listed stocks. In each case, the messages were being passed around, just before the results were officially announced. These messages were being circulated in private Whatsapp groups frequented by equity traders. These were all big companies - in fact, more than half of the stock concerned are members of the Nifty-50.
ALSO READ: Predictive messages about Indian cos results circulate in WhatsApp groups

WhatsApp, an instant messaging service owned by Facebook, is a popular platform for all sorts of sensitive communications. It is encrypted end-to-end, making it impossible for even the service provider to monitor content.

There are many private groups of equity traders on the Whatsapp platform and the circulation of messages claiming to have credible "khabar" seems to be quite common. Such messages are often wildly inaccurate, and sometimes they are just rehashes of known consensus estimates. But in the cases mentioned in this report, the messages were extremely accurate and much closer to the reality of the results than the consensus estimates.

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