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Update: SEBI Adjudication Order on Circulation of UPSI with Respect to Mindtree Limited

The Securities and Exchange Board of India (“SEBI”) vide its Adjudication Order No. Order/BD/VS/2020- 21/7825 dated 29 May 2020 (“Order”) in the matter of circulation of unpublished price sensitive information (“UPSI”) through WhatsApp messages with respect to Mindtree Limited (“Mindtree”) under Section 15-I of SEBI Act, 1992 (“Act”) read with Rule 5 of SEBI (Procedure for holding inquiry and imposing penalties) Rules, 1995 in respect of Ms. Shruti Vishal Vora (“Insider”), who works in the institutional equity sales team at Antique Stock Broking.


The Order pertained to an investigation carried out by SEBI in light of several news articles referring to circulation of UPSI in private WhatsApp groups. During the preliminary examination, the following chat related to Mindtree‟s financial information was found in the WhatsApp chat in the Insider’s seized device


“Mindtree revenue 1295cr Pat 103 Pbit 128”

It was found that the Information shared with and by the Insider on the WhatsApp chats matched closely with the quarterly results of Mindtree announced publicly two days later.

SEBI was ascertaining whether the circulation of Information on WhatsApp was in violation of Section 12A(d) and (e) of the Act and Regulation 3(1) of the SEBI (Prohibition of Insider Trading) Regulations, 2015 (“PIT Regulations”).

Extracts of the relevant provisions are as follows:

Regulation 2(1)(g) of the PIT Regulations:

“Insider” means any person who is:

(i) a connected person; or

(ii) in possession of or having access to unpublished price sensitive information;

Regulation 3(1) of PIT Regulations:

No insider shall communicate, provide, or allow access to any unpublished price sensitive information, relating to a company or securities listed or proposed to be listed, to any person including other insiders except where such communication is in furtherance of legitimate purposes, performance of duties or discharge of legal obligations.

Section 12 A(d) of the Act:

No person shall directly or indirectly engage in insider trading.

Section 12 A(e) of the Act:

No person shall directly or indirectly deal in securities while in possession of material or non-public information or communicate such material or non-public information to any other person, in a manner which is in contravention of the provisions of this Act or the rules or the regulations made thereunder

The Insider had received the Information from a person and shared it further on several one-on-one chats. SEBI was unable to trace the source of the Information due to technological constraints because of end-to-end encryption of WhatsApp chats.


The Information was viewed by SEBI as UPSI. The Insider had claimed that she had relied on some of the broker firms’ estimates on the publicly available Bloomberg terminal, which had compiled twenty two estimates given by broker firms and analysts in their report preview released prior to result announcement. The results she claimed to rely on were closely matching with the Information and she submitted screenshots of the website.

SEBI put the onus on the Insider to demonstrate as to on what basis the specific estimates have been claimed to be the source distinguishing them from the rest. SEBI was of the opinion that if the Insider had in fact relied upon any specific research estimates or her forwarded messages had originated from the information from such estimates, it should be demonstrable, verifiable trail of well documented and laid down process in consonance with the job profile of the Insider. Further, SEBI emphasized on the fact that the Insider shared the Information with other unconnected entities instead of communicating it only to the clients of her broker firm as part of her job. On basis of the above arguments, SEBI concluded that the Information ought to have originated from the closed WhatsApp group.

SEBI stated that UPSI is essentially information that is not generally available but on becoming generally available materially affects price of securities. It referred to the Justice Sodhi Committee Report (“Report”) which laid down the principles on how such general availability needs to be ascertained. The Report states that any information that is accessible to the public on non-discriminatory basis would qualify to be generally available. If any information is generally available or unpublished is a mixed question of fact and law. The Insider’s statement that the Information was an outcome of the research did not by itself make it generally available according to SEBI. The fact that Insider relied on specific estimates of brokerages out of twenty two published on Bloomberg terminal and failed to establish how her reliance on one estimate was generally available information given that she did not place any evidence to indicate that the Information was derived from any research work of her own or any other specific report.

SEBI observed that the information should be based on research which in turn should be based on generally available information and the research work should be accessible on a non-discriminatory basis. In case of the Insider, SEBI observed that the Insider did not bring any evidence on record to show that the Information emerged based on the generally available information and the circulation of such information between closed groups is discriminatory in nature. Therefore, the Information failed the test of “generally available information‟ as contended by the Insider and the circulation of Information as being in against the rule of parity of information and perpetuating information asymmetry.

SEBI disagreed with the “Heard on Street” defence (“HOS”) of the Insider. The Insider had contended that the nature of Information was that of “Heard on Street”, that is, the circulation of such information was a regular practice and it was a part of her job as part of being involved in institutional sales, to accumulate information about movement in the markets, possible stock prices, news about important elements in the financial world, etc. Given that there was an absence of any document or evidence to show that the accurate financial results were accessible to public, SEBI held that the Information was not in the nature of HOS as only a few closed set of people including the Insider were in possession of the UPSI thereby granting an undue advantage to them.

SEBI opined that the information published on Bloomberg could not be reasonably accepted as the source of the Information and held that (i) the Information was not in the nature of HOS; and (ii) it was UPSI.

SEBI took a view that Ms. Vora was an “insider” in terms of PIT Regulations for being in possession of the UPSI. It observed that PIT Regulations, envisaged that a person is an “insider” merely for being in possession of UPSI. Further, SEBI relied on the Note to the Regulation 2(1)(g) of the PIT Regulations which clarifies that “it is intended that anyone in possession of or having access to unpublished price sensitive information should be considered an “insider” regardless of how one came in possession of or had access to such information.” Therefore, after establishing that the Information was UPSI, SEBI held Ms. Vora to be an “insider” for possessing it.


SEBI held that Ms. Vora was in violation of the PIT Regulations for being an “insider” with respect to the UPSI relating to Mindtree and communicating it to other persons through WhatsApp messages.

Due to the paucity of evidence arising from end-to-end encryption of WhatsApp chats, SEBI found it difficult to quantify the disproportionate gain or unfair advantage enjoyed by the Insider and the consequent losses suffered by the investors. Nevertheless, SEBI was of the view that the unauthorized circulation of UPSI such as financial results held a scope to pose a greater threat to the integrity of the stock markets and such instances should be dealt with strictly to curb and discourage future attempts of the same. Therefore, SEBI imposed a penalty of fifteen lakh rupees on the Insider for the violations under Section 15G of the Act.


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