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Glare on Facebook in insider trading: SEBI scans profiles for evidence


The Securities and Exchange Board of India (Sebi) has now been looking through Facebook profiles to catch manipulators involved in insider trading cases.

The regulator is scanning suspected individuals friends list and activity performed through their profiles to establish whether they were ‘connected’ in a case related to violation of insider trading norms.

SEBI, while dealing the deep industries case, found that the entities involved in insider trading were ‘friends’ on the social networking site. The connected individuals having an alleged hand in glove and also liked each other’s pictures on Facebook.

SEBI deemed this sufficient to establish that the businessman was ‘connected’ with the MD of a particular firm for purposes of insider trading.

The MD had purchased shares of the company during a period during which SEBI alleged that unpublished price-sensitive information existed. He was alleged to be guilty of insider trading and asked to deposit the profits made plus interest @ 12 per cent per annum.

The regulator said in an order dated April 16, that the profiles of these persons were having restricted access and the photos posted by them can be ‘liked’ only by select persons whom they have added as their ‘friends’ on Facebook, reports ET via PTI.

After gathering evidence, Sebi has ordered impounding of unlawful gains worth over Rs 2.4 crore from three entities involved in the case.

This was not the first time when Indian regulator has examined Facebook profiles of suspects to gather information about a connection. By an order dated 4 February 2016, SEBI had similarly used such information to determine connections.

Also read: Govt issues a show-cause notice to Facebook over Indians’ data leak

According to SEBI norms, a person or an entity is considered an insider on the basis of various aspects, including by way of their association in any capacity with the company concerned and has access to unpublished price sensitive information.

Persons involved in frequent communications with officers, including through “likes on social media”, of the company concerned can also be held as insiders.


What seems unusual here is, the regulator is taking social media connections, which are most often casual in nature where persons involved may not know each other personally or professionally, as an important factor to arrive at a judgment. There are many people with hundreds of such connections.

Irrespective of the outcome, the move will certainly serve as a caution for social media users, who may be from next time will think twice before befriending others on social sites.

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