The Securities and Exchange Board of India (SEBI) on Wednesday passed an interim order restraining CNBC TV anchor Hemant Ghai, his wife, Jaya Hemant Ghai and mother Shyam Mohini Ghai from buying, selling, or dealing in securities, either directly or indirectly until further orders.
The order was passed after SEBI concluded that there was prima facie evidence that Ghai used his position as a host of television show ‘Stock 20-20’ to indulge in orchestrated trades and make financial gains.
“The prima facie unfair conduct of the entities has the potential to cause irreparable injury to the securities market. The balance of convenience dictates that immediate action must be taken against the entities to prevent further harm to the investors and the securities market. Moreover, the proceeds which have been generated are intrinsically linked to the prima facie unfair conduct of the entities,” SEBI said in its order.
It was alleged that Ghai used to recommend the shares on his TV program “Stock 20-20”, stocks of which he would have already purchased in name of his wife and mother. The same would be sold immediately after he had made ‘buy recommendations’ in the show leading to increase in price of those shares.
“By purchasing shares in the accounts of Jaya Hemant Ghai and Shyam Mohini Ghai for which buy recommendation is given, with the advance information of buy recommendation and thereafter selling the same as soon as the market opens on the recommendation day unfairly taking advantage of the price and volume rise post recommendation is a fraud played upon the market and the viewers of the Show. The viewers of the Show trust the recommendation made in the Show without realizing the scheme has been devised for their personal gains,” the order said.
The market regulator, therefore, also restrained Hemant Ghai from undertaking, directly or indirectly, any activity related to giving investment advice, sell or buy recommendations, publishing of research reports etc., related to the securities market, till further directions.
Further, the bank accounts of Hemant Ghai, Jaya Hemant Ghai and Shyam Mohini Ghai were also frozen for debit until further directions.
SEBI also ordered CNBC TV18 to bring to the notice of the viewers of the shows co-hosted by Hemant Ghai that SEBI has passed an interim order against him for prima facie violations of SEBI Act and SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (PFUTP Regulations).
Hemant Ghai is the co-host of the show Stock 20-20 which airs on trading days at 7:20 am and recommends certain stocks to be bought during the day with a target price and a stop loss price.
As per SEBI, the trades executed in the trading accounts of Jaya Hemant Ghai and Shyam Mohini Ghai were analysed and it was observed prima facie, that there was a repeated pattern of buying shares in those trading accounts on the previous day to the buy recommendations made on the Show co- hosted by Hemant Ghai. It was then sold immediately after the said buy recommendations.
“On analysis of the trading pattern of 2 entities viz. Jaya Hemant Ghai and Shyam Mohini Ghai for the period between January 1, 2019 to May 31, 2020, high correlation of the trades of the aforesaid entities was observed with the recommendations furnished in the show Stock 20-20 aired on news channel CNBC Awaaz,” the order noted.
Based on the evidence available, the SEBI also concluded that prima facie it could be inferred that the recommendation in the show to buy the scrip had a significant impact on the price, particularly opening price, and volume of the scrip as there was no other material price sensitive corporate announcement supporting the significant price and volume variation in the scrip on the day of the recommendation or the prior day.
“Discernable increase in price and volume of the recommended scrip on the day of recommendation has taken place frequently over the course of the relevant period. Therefore, it is prima facie, observed, that the preponderance of probability is that a buy recommendation given on the Show co-hosted by Hemant Ghai, has a significant positive effect on the price and volume of the scrip,” the order said.
The trades in the account of his wife and mother and wife were is executed just one day prior to recommendation day and 90 such trades with aggregate value of over Rs. 100 crore were executed.
In other words, where the first buy leg of the trades is executed just one day prior to recommendation day, Hemant Ghai must have been aware of the buy recommendation that was going to be given the next day on the show, which gave him the confidence to execute/facilitate the buy position in the trading accounts of his wife and mother, SEBI said.
The market regulator held that the trading behaviour employed by them to execute trades synchronised with Show recommendation not only prima facie undermines ethical standards, but it does also not prima facie, conform to the principles of fair and transparent dealings in the securities market.
It also has the effect of interfering with the development of the securities market, as investors tend to lose faith in the securities market in the face of such behaviour particularly by persons with large following. Mr. Hemant Ghai has approximately 1,16,000 followers on twitter on the back of his popularity.
The acts of Hemant Ghai, Jaya Hemant Ghai and Shyam Mohini Ghai were prima facie in violation of SEBI Act and SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003.