A series of raids by India's market regulator, investigating whether corporate announcements were prematurely leaked by market participants in social media chatrooms, were the largest it has conducted.
SEBI's chairman, Ajay Tyagi, at a press conference on Thursday said that pursuing suspected illegal activity taking place on social media was new territory for the regulator.
Dozens of SEBI officials raided offices and homes of brokers on Dec 22, seizing mobile phones and laptops, one regulatory source told Reuters. As many as 30 brokers were targeted in the action, according to local media.
A senior official at SEBI expressed confidence that the regulator would be able to successfully prosecute any cases that came out of the investigation.
"We have enough powers to proceed," the official, who requested anonymity because he was not allowed to speak with media. SEBI was "testing if the powers given to us can stand the scrutiny of law. If not, we will again ask for amendment to the regulations and laws. We will strengthen it."
SEBI has broad search-and-seizure powers that enable it to seize "books, registers, other documents" and records of anyone associated with securities markets, according to the regulations laid out in the official act that governs the regulator's activity.
Those powers would likely allow the regulator to withstand in court any challenge to the seizure of electronic gadgets, the lawyers said.
But whether SEBI has legal rights to get into individual social media accounts does not appear to have been established, the lawyers said. They said they were not aware of any explicit law that gives SEBI power to access social media accounts or compel users to provide passwords.
On Wednesday, SEBI ordered Axis Bank (AXBK.NS), which was among the 12 companies to conduct an internal investigation into a suspected leak of financial information and to strengthen its handling of such data, as part of the investigation.
Under India's insider trading laws, it is illegal to circulate "unpublished price sensitive information", which is defined as "any information" that is not "generally available" and that could have a market impact.
The lawyers said that SEBI would need to conclusively prove that any messages posted by those under investigation qualified as constituting "unpublished price sensitive information."
Individuals could make the case that information was "generally available" if they had merely taken it from other WhatsApp groups, for example, and posted it elsewhere, or cite it as general market speculation, they said.
