Directions in the matter of Tata Motors Limited

1. In the recent past, certain articles have been published in newspapers / print media referring to the circulation of Unpublished Price Sensitive Information (“UPSI”) in various private WhatsApp groups about certain companies ahead of their official announcements to the respective Stock Exchanges.

2. In this backdrop, Securities and Exchange Board of India (“SEBI”) initiated a preliminary examination in the matter of circulation of UPSI through WhatsApp groups. During the course of preliminary examination, it was observed that in respect of company named Tata Motors Limited (“Tata Motors”), the messages circulated in WhatsApp matched with the quarterly financial results of the company for December 31, 2015, which were published subsequently. The following was, inter alia, noted in respect of messages relating to Tata Motors:  The message in circulation in WhatsApp was with respect to quarterly financial results of Tata Motors for the quarter ended December 31, 2015, prior to the official announcement by Tata Motors. The actual results of Tata Motors were announced to Stock Exchanges on February 11, 2016 at 15:16 hours.  As per information on record including the extracts of WhatsApp message, the message was in circulation since 12:29 hours on February 11, 2016.  It was observed that the figures that were in circulation in WhatsApp about Tata Motors were matching with the actual announcements as can be seen in the following table: Particulars Whatsapp Post Actual Results Turnover ` 72,256 crores ` 72,256.40 crores EBITDA ` 10,236 crores ` 10,236.47 crores Margin 14.20% 14.17% PBT ` 4,176 crores ` 4,175.69 crores PAT ` 3524 crores ` 3524.41 crores Insurance claim ` 300 crores ` 299.30 crores Date & Time 12:29 hours on 15:16 hours on February 11, February 11, 2016 2016 EBITDA- Earnings before Interests, Taxes, Depreciation and Amortization, PBT- Profit before Tax; PAT- Profit after Tax Directions in the matter of Tata Motors Limited

3. In this context, information was sought from Tata Motors with regard to the aforesaid circulation of its quarterly results for the quarter ended December 31, 2015 in WhatsApp prior to its official announcement. Tata Motors was also asked to submit information regarding the processes / controls that it had in place regarding handling of UPSI.

4. In response thereto, Tata Motors submitted that: (i) The concerned officials shared the information on turnover, profit figures and margins with the concerned departments/ teams involved in the preparation and publication of quarterly results viz Accounts, Investors Relations, Corporate planning, secretarial and with the Statutory Auditors, for official purposes only, and on a need to know basis. (ii) Sharing of information on financial results, wherever required, was done in a secured way through password protected files. The password is then shared via a separate email/ SMS to safeguard the confidentiality of the information. (iii) The agenda papers for Audit Committee and Board meeting are shared with the members and regular invitees through the TCS Board App (accessible only on iPads) which is a secured portal on which the secretarial team uploads pdf files which can be reviewed by the members only through access to the portal by way of secured log-ins. (iv) By following the above process to safeguard any UPSI, the company ensures that there is a prescribed singular information flow channel, which restricts the availability of such financial information with a limited number of people, who require the same to discharge their duties.

5. Tata Motors also provided the chronology of events relating to preparation and finalization of its financials relating to quarter ended December 2015. It was submitted that the preparation of financial results started from January 15, 2016. The financial results were formally disclosed on February 11, 2016.

6. It is noted from the information provided by Tata Motors that the work relating to preparation of financial results for the quarter ended December 2015 started on January 15, 2016 with preparation of financials based on trial balance including that of the financials of the subsidiaries of the company. Thereafter, financials were shared with the Statutory Auditors. Subsequently, the investor Relations department received the company’s financial results from the Accounts team and modified it to include the financial numbers and got first level clearance from CFO. Then the financials were presented in the Audit Committee meeting held on February 9, 2016. Finally, the results were officially declared on February 11, 2016 at 15:16 hours (as per BSE website).

7. Thus, it prima facie appears that the financial results of Tata Motors for quarter ended December 2015 were finalized on or before February 9, 2016, which was before circulation of WhatsApp message on February 11, 2016.

8. It is observed that the financial figures pertaining to the quarterly results of Tata Motors were matching with the figures that were in circulation prior to its official announcement by Tata Motors. Such resemblance of the information circulated on WhatsApp with the actual financial results prima facie indicates that the financial figures of Tata Motors, were in circulation prior to official announcement/ publication by Tata Motors. The same could not have been possible without leakage of information from the person(s), who were privy to the information relating to financials prior to its official announcement.

9. In this context, it is noted that leakage of unpublished quarterly financial results (covered under the definition of UPSI under regulation 2(n) of Prohibition of Insider Trading Regulations 2015 (“PIT Regulations”) which eventually led to circulation of messages through WhatsApp is prohibited and is in contravention of regulation 3(1) and (2) of SEBI PIT Regulations 2015 read with section 12A(e) of the Securities and Exchange Board of India Act, 1992 (“SEBI Act”) which prohibit procurement or communication of UPSI. The said provisions read as under:

Regulations 3(1) and (2) of PIT Regulations: 3. (1) 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. (2) No person shall procure from or cause the communication by any insider of unpublished price sensitive information, relating to a company or securities listed or proposed to be listed, except in furtherance of legitimate purposes, performance of duties or discharge of legal obligations.

Section 12A (e) of the SEBI Act

12A. No person shall directly or indirectly— … (e) 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;

10. It is observed that at this stage, the source / origin of the leakage of UPSI cannot be ascertained. However, it can prima facie be inferred on the basis of the afore-discussed facts and circumstances that the UPSI relating to financials of Tata Motors was leaked. Such leakage is prima facie attributable to the inadequacy of the processes / controls / systems that Tata Motors as a listed company had put in place. While procurement or communication of UPSI by any person is identified as a violation of regulation 3 of PIT Regulations and section 12A(e) of the SEBI Act, it becomes incumbent upon every listed company to put in place processes/ controls/ systems that would ensure that such procurement or communication of UPSI does not take place.

11. In view of the foregoing, I, in exercise of powers conferred upon me under sections 11 and 11B of the SEBI Act read with section 19 thereof, in the interest of securities market, hereby direct as under: i) Tata Motors shall strengthen its processes/ systems/ controls forthwith to ensure that such instances of leakage of unpublished price sensitive information do not recur in future; ii) Tata Motors shall submit a report on  The present systems and controls and how the present systems and controls have been strengthened.  Who are the persons responsible for monitoring such systems.  The periodicity of monitoring. The said report shall be submitted along with the inquiry report mentioned below. iii) Tata Motors shall conduct an internal inquiry into the leakage of unpublished price sensitive information relating to its financial results and take appropriate action against those responsible for the same, in accordance with law. The scope of such inquiry shall include and not be limited to determination of the possible role of following persons in relation to the aforesaid leakage of UPSI: a) Persons / members of committees involved in generation of the original data for the purpose of determination of key figures pertaining to financial figures. b) Persons involved in the consolidation of the figures for the financial results. c) Persons involved in the preparation of board notes and presentations. d) Persons involved in dissemination of information relating to financial results in the public domain. e) Any other persons who had access to the information. iv) The inquiry directed above shall be completed within a period of 3 months from the date of this order, and within 7 days from the completion thereof, Tata Motors shall file a report to SEBI in that regard.

Sd/-

DATE: March 06, 2018 MADHABI PURI BUCH PLACE: MUMBAI WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA