Hinged Upon Conjectures: A Meticulous Study of WhatsApp Leak Case

[By Lakshya Garg and Vimlendu Agarwal]

The authors are students at Gujarat National Law University, Gandhinagar.


The social media platform is an all-pervading phenomenon[i] and despite of the developments that this platform has brought by providing easy access to the information it has still paved way for exploitation of the confidential information[ii]. This article, in pursuance of the objective to demystify the peculiarities in the Shruti Vishal Vora Case, is an attempt to discuss the SEBI’s Order No. Order/BD/NR/2020-21/7591-7592[iii]dated 29.04.2020 as it holds a lot of conjectures within itself.

While pinning our hopes for a robust security law regime in conjunction with well-established data privacy laws the article constructively criticizes the Securities Appellate Tribunal’s (SAT) decision to penalize a person for releasing unpublished price sensitive information related to the financial result of a Company along with the challenges faced throughout the pronouncement.

Factual Matrix

The said case concerns itself with the circulation of Unpublished Price Sensitive Information (hereinafter referred as “UPSI”) [regulation 2 (n) of SEBI (Prohibition of Insider Trading) Regulations, 2015] through WhatsApp (group) Messages revealing sensitive information about big shot companies such as Ambuja Cement Ltd. Section 3 (1) of SEBI (Prohibition of Insider Trading) Regulations, 2015[4]prohibits communication or procurement of unpublished price sensitive information, relating to a company or security listed or proposal to be listed, to any person including other insiders except where such communications is in furtherance of legitimate purpose, the performance of duties or discharge of legal obligations.

The eccentricity lies in the fact that to scrutinize similarities with the 3rd financial quarter results 2016-17 and the propagated information- about 190 devices, records, etc. were seized. To one’s surprise, the derived information closely matched with the messages circulated in WhatsApp group chats (retrieved from Shruti Vora’s device). The said Notice argued the information to be “Heard On The Street” in its defense. However, as per SEBI the mentioned figures were too accurate to be considered as estimates and held that the numbers can’t be associated with any brokerage or internal research. Hence Shruti Vora and Neeraj Kumar Agarwal both were considered as insiders and were penalized with 15 Lakh rupees each under Section 15G, 12A (d) & 12A (e) of the Securities and Exchange Board of India Act, 1992[5]for possessing and communicating unpublished price-sensitive information.

Lacunae In The Method Of Investigation

The method used to declare someone guilty of “insider-trading[6]was quite simple in this case. The investigation authority looked for the information that was circulated through the WhatsApp groups and then compared it to the final declaration made by the company. However, while following the said procedure, the investigation authority faulted in the following:

  • Due to technological restrictions, it was unable to establish the source of the information, thereby solving a case while covered with a blindfold.
  • It didn’t focus on the possibility that the accused might have not known the information to be UPSI, thereby making the whole case an ignorance of facts.
  • It failed to establish the thought-process that the accused might have while circulating the information. If he/she believed it to be a genuine result of market study then the whole case becomes a formality.

For instance, the Bata order[7]wherein the Adjudicating officer acknowledged the communication of UPSI ahead of their official announcements but ruled out the fact that being financial analyst, brokerage firms often keep a close trace on a wide range of determining factors and are repeatedly accurate in accomplishing close estimates and figures.

HOS V UPSI: The “Heard On The Street” Mockery

The major argument contended in these cases was basically an attempt to prove the information that was circulated is an unsubstantiated gossip that was forwarded as a rumor or a general approximation. It further argued that these kinds of speculations are common parlances that were majorly based on financial modeling, management guidance, meetings with the management, and the other global factors. Likewise, HOS being a global formula was applied by the entire trading and investor community in the instant case to plan trades.

An analysis of SEBI orders in the recent cases, solves the enigma of the information belonging to the category of UPSI as it mentions:

  • The information was available in a closed chain group instead of being available to the public at large
  • The information was not a result of any market research or publicly available data. Moreover, the ignorance pleaded by the market professionals regarding the nature and materiality of information is ignorance of law.
  • The suspicion should have aroused when the information available matched with the announced result and hence should have been duly reported.

Scrutinizing The SEBI Orders

The basic questions such as ‘who is an insider (Section 2 (1)(g) of SEBI (Prohibition of Insider Trading) Regulations, 2015)[9] or ‘what is UPSI[11]:

  • The subsequent announcements made should be the result of the leaked information. However, the inability to trace back the source is irrelevant in determining whether such information was UPSI.
  • The evidence could not lead to the fact that the purported UPSI was a product of the field-based market information which is non-discriminately available in the public domain.
  • The accused was a financially literate person who was well aware of the functioning of the securities market. Regardless of this, they were an instrument in the “chain of communication”.
  • No alarm was raised by the accused, even when they found out that the circulated information matched the announced results accurately.

When the SEBI applied the above facts to the settled legal positions, it found that accused were the insiders and the information was undoubtedly ‘UPSI’. In the end, the gist of the matter was the nature, possession, and a pattern of circulation of information.

The Intricacy Of The Investigation:

In various domains of law, we often observe an intersection between private rights of an individual and the decision making for the public interest at large[12] (in this case the investors). This creates a scenario where one cannot be achieved without disturbing the other. A similar encounter could be seen in the present case wherein the features introduced to respect the privacy of the individuals, proved to be the greatest hindrance in the investigation. The end-to-end encryption[13] (a feature of WhatsApp) forbids any third-party access or transfer of the messages. As a result the track-down procedure could not be completed subsequently. Therefore, SEBI investigated by comparing the estimates with the actual figures and upon finding the almost-perfect similarity, it concluded it to be UPSI.

It is true that a regulator will always be a victim of the hindrances caused by the complexities of technological advancement. The present time is a crucial one where the challenges created by the disclosure of UPSI which ultimately violate the “rule of parity of information[14] and perpetuating asymmetrical information need to be addressed. In recent years, we have observed a number of scenarios where social media and matrimonial websites have been operated as insider trading platforms. The time demands an introduction of the technology in the security law regime to curb market manipulation and solve the problem of unstructured data analysis. The Data Lake Projects[15]in this field is a great initiative which might help to augment analytical capabilities.

Understanding The Need For Damage- Control And What It Takes

The SEBI (Prohibition of Insider Trading) (Amendment) Regulations, 2018[16]over the period of time have emerged as a path-breaking legislation and now it has taken a crucial leap to control the leakage of UPSI. These amendments have hit the foundations and have underpinned the internal controls, maintaining a database of persons involved in generating or having access to UPSI, safeguarding the whistleblowers, and instituting the processes involved in the leakages of UPSI. Moreover, to attack the issue at its roots, SEBI can trace the steps of International Regulators such as UK’s Financial Conduct Authority and embark on a version of ‘exam sweeps[17]over listed companies and other intermediaries. This will assist in providing the required course of action as well as warnings to the companies regulating the usage of electronic communication of information. On the international platforms, one might have observed in the recent years, the investment banks and other financial service firms have prohibited the employees from using encrypted messages. While some of the institutions have endeavored to the level of barring the use of personal mobile devices in the workplace.

Although the regulators are obligated to perform the required functions such as the creation of a proper framework, taking the required actions against the non-compliances, etc. yet the whole regime might fail due to its ill-equipped mechanism with poor implementations. At the risk of turning out to be unprepared on the onslaughts of facing such challenges, there is a need to protect the economic interests especially when it comes to private companies since the private equity investors possess certain economic interests in the portfolio companies. The problem of such information-sharing lies in the extensiveness of the information itself as it gets trouble-free for some unsuspecting middleman and junior employees which could potentially be communicating UPSI.


The present situation provides a fair amount of time to the stakeholders to think and decide the future aspects that could help this sector. The importance and the robustness of the internal control measures is an essential element to safeguard the interests of the investors and the integrity of the securities market.

The situation in the instant case presented us with a scenario where it seems likely that for a proper investigation, the end-to-end type encryption facility has to be renounced. However, the same is not possible since it would lead to the infringement of the right to privacy envisaged under Article 17 of International Covenant on Civil and Political Rights[18], Article 12 of Universal Declaration of Human Rights[19]and Article 21 of the Indian Constitution[20]. The pressing priority is to find out an epicenter where the right to privacy as well as investigation techniques can subsist in harmony. This can be done under the guidelines of an authority by bridging the gap between the two.

Prima facie, the major problem that the whole scenario presents is the limitation it provides against the freedom of speech[21]. There might be scenarios where some of the Heard-on-Street speculations or estimates based on public data are being circulated but will be curbed due to the fear of it being UPSI. One cannot follow the source of every information and might be denied of an opportunity that has been presented to him via the instrumentality of that particular information. Therefore, to deal with such kind of situations, UPSI should be defined properly instead of providing a case-to-case basis complexity.


[1]Rene Corbeil, J. and Elena Corbeil, M., The birth of a social networking phenomenon, Emerald Insight, (January 13, 2011), https://doi.org/10.1108/S2044-9968(2011)0000001004

[2]John H. Sawyer, How Attackers Target and Exploit Social Networking Users, DarkReading, (August 15, 2013,
06:58 AM), https://www.darkreading.com/risk/how-attackers-target-and-exploit-social-networking-users/d/d-id/1140303

[3]Adjudication Order No. Order/BD/NR/2020-21/7591-7592, (SEBI),https://www.sebi.gov.in/enforcement/orders/apr-2020/adjudication-order-in-respect-of-neeraj-kumar-agarwal-and-shruti-vishal-vora-in-the-matter-of-circulation-of-upsi-through-whatsapp-messages-in-the-scrip-of-ambuja-cements-ltd-_46613.html

[4]Securities And Exchange Board Of India (Prohibition Of Insider Trading) Regulations, (2015), https://www.sebi.gov.in/legal/regulations/jan-2015/sebi-prohibition-of-insider-trading-regulations-2015-issued-on-15-jan-2015-_28884.html

[5]Securities and Exchange Board of India Act, 1992 [As amended by the Securities Laws(Amendment) Act, 2014] https://www.sebi.gov.in/sebi_data/attachdocs/1456380272563.pdf

[6]Akhilesh Ganti, Insider Trading, Investopedia, (May 8, 2020),https://www.investopedia.com/terms/i/insidertrading.asp

[7]Directions in the matter of Bata Limited, (SEBI), (May 18, 2018),https://www.sebi.gov.in/enforcement/orders/mar-2018/directions-in-the-matter-of-bata-india-limited_38172.html

[8] [Paragraph (¶) 41] Adjudication Order No. Order/BD/NR/2020-21/7591-7592, (SEBI),


[9]Securities And Exchange Board Of India (Prohibition Of Insider Trading) Regulations, (Jan. 15, 2015), https://www.sebi.gov.in/legal/regulations/jan-2015/sebi-prohibition-of-insider-trading-regulations-2015-issued-on-15-jan-2015-_28884.html

[10]Unpublished Price Sensitive Information-Dilemma to be Looked Upon, Corporate Professionals, (Feb. 26, 2018),


[11] Adjudication Order No. Order/BD/NR/2020-21/7591-7592, (SEBI), https://www.sebi.gov.in/enforcement/orders/apr-2020/adjudication-order-in-respect-of-neeraj-kumar-agarwal-and-shruti-vishal-vora-in-the-matter-of-circulation-of-upsi-through-whatsapp-messages-in-the-scrip-of-ambuja-cements-ltd-_46613.html

[12]Sidharth Chopra and Nandita Saikia,Cross-Sectoral Conceptions of ‘Public Interest’, Bar and Bench, (December 02, 2018, 05:50 PM), https://www.barandbench.com/columns/cross-sectoral-conceptions-of-public-interest

[13]End-to-end encryption, Whatsapp FAQ, https://faq.whatsapp.com/general/security-and-privacy/end-to-end-encryption/

[14]June Rhee, Comparing Insider Trading in the US and Europe, Harvard Law School Forum on Corporate Governance, (June 19, 2014),                                                      https://corpgov.law.harvard.edu/2014/06/19/comparing-insider-trading-in-the-us-and-europe/

[15]Securities & Exchange Board of India, Implementation of Data Analytical Project and Building of Data Models at SEBI, (November 1, 2019), https://www.sebi.gov.in/sebi_data/tenderfiles/nov-2019/1574319751498.pdf

[16]Securities and Exchange Board of India (Prohibition of Insider Trading) (Amendment) Regulations, 2018, (December 31, 2018),  https://www.sebi.gov.in/legal/regulations/dec-2018/securities-and-exchange-board-of-india-prohibition-of-insider-trading-amendment-regulations-2018-dated-december-31-2018_41570.html

[17]Targeted Exam Letters, Finra, https://www.finra.org/rules-guidance/guidance/targeted-examination-letters

[18]International Covenant on Civil and Political Rights, United Nations Human Rights-Office of High Commissioner, (March 23, 1976), https://www.ohchr.org/en/professionalinterest/pages/ccpr.aspx

[19]Universal Declaration of Human Rights, United Nations, (December 10, 1948),        https://www.un.org/en/universal-declaration-human-rights/#:~:text=Article%2012.,against%20such%20interference%20or%20attacks 

[20]Article 21- Protection of life and personal liberty, Constitution of India, https://www.constitutionofindia.net/constitution_of_india/fundamental_rights/articles/Article%2021

[21]Article 19-Protection of certain rights regarding freedom of speech, etc., Constitution of India, https://www.constitutionofindia.net/constitution_of_india/fundamental_rights/articles/Article%2019


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