SEBI Restrains CNBC Awaaz Television Anchor Hemant Ghai From Dealing In Securities
In a first of its kind order, India’s market regulator has restrained Hemant Ghai—host of various shows on Hindi business television channel CNBC-Awaaz—from buying, selling or dealing in the securities market. Ghai has also been directed to cease and desist from giving any investment advice or stock recommendations till further directions. His bank accounts and those of two family members have been frozen.
Jaya Ghai and Shyam Mohini Ghai — Hemant Ghai’s wife and mother respectively— undertook a large number of “Buy-Today-Sell-Tomorrow” trades in synchronisation with the recommendations made on the morning segment show co-hosted by him, the Securities and Exchange Board of India has alleged in an ex-parte, ad interim order.
Shares were bought on the previous day and sold immediately on the day when a recommendation was made on the show, SEBI’s order has pointed out. The regulator has arrived at a prima facie conclusion that the over Rs 100 crore in 90 trades executed in trading accounts of the two family members between January 2019 to May last year led to gains of more than Rs 2.95 crore.
This is a violation of the SEBI Act and Prohibition of Fraudulent and Unfair Trade Practices regulations, the order stated.
SEBI’s whole-time member Madhabi Puri Buch framed three issues to arrive at her findings, which were—whether there was a repetitive pattern in buying and selling of shares in a synchronous manner; did such trades violate SEBI regulations; and whether the three individuals are liable for the prima facie violations.
The Modus Operandi
The market regulator examined the KYC details and trading records of Ghai’s mother and wife, along with the list of stocks recommended in the morning show, trading volume and the price change in such shares before and on the day of recommendation.
Further it also examined call data records of Hemant Ghai which indicated regular communications with an equity analyst of MAS Consultancy, an authorised person of Motilal Oswal Financial Services Ltd.
Based on this investigation, the regulator pointed to the following modus operandi:
- A day prior to the stock recommendation, Jaya and Shyam Mohini Ghai would buy “substantial” number of shares by executing buy orders.
- The next day, recommendations were made in the morning show.
- After market opening, a significant number of sell trades were executed through trading accounts of Jaya and Shyam Mohini Ghai based on the interest created by the recommendation.
- SEBI found more than 80% co-relation between trades executed by the Ghais on the stock exchanges and the recommendations given on the morning show. This included trades by the Ghais in more than 75 scrips—namely, Aptech Ltd., JK Paper Ltd., NIIT Ltd., Praj Industries Ltd., BEML Ltd., Andhra Bank etc.
- The recommendation made on the show would result in a significant positive effect on the price and the volume of the company’s shares.
- In certain instances, the change in the price of the recommended scrip on the next day was as high as 9%.
Broker’s Responses Not Credible, Says SEBI
SEBI has noted that Hemant Ghai was in “constant communication” with two employees of MAS Consultancy, one of whom handled the trades for the account of his wife and mother.
Further, as a part of its investigation, SEBI sought MAS Consultancy’s response on the trades executed by the Ghais. While the broker maintained that they visited its branch office in Mehsana, Gujarat, to place the orders, the market regulator found this response lacking in credibility.
“....trades in their trading accounts have been executed on successive days and sometimes on 3 out of 5 trading days. Their address, as reflected in KYC of their bank and trading accounts, is in Mumbai. The approximate distance between Mumbai where the entities reside and Mehsana, where the trading member is located, is approximately 600 km.
Further, on the analysis of call data records during corresponding dates of trades in 2020, the location of the Ghais was in Mumbai and not Mehsana, SEBI has noted.
Based on this, on a prima facie basis, the regulator noted that there were no calls from the cell phones of the two individuals to the broker. Thus inferring that Hemant Ghai was controlling and operating the trading accounts on behalf of his mother and wife.
Recommendations On The Show Was Material Information, Says SEBI
Based on this, SEBI arrived at a prima facie conclusion that:
- Ghai had advance information of the recommendation that was to be made on the morning show and he used it directly/indirectly to his advantage.
- The buy recommendations given on the show constituted material information.
- Synchronised trades meant that he executed the trades while in possession of material and non-public information as part of a scheme. Such trades don’t conform to the fair and transparent principles of trade in stock markets.
And so, SEBI has concluded that the three individuals indulged in unfair trade practice in the securities market.
It is prima facie, found that such trading pattern is a fraudulent scheme prevented under 12A (b) of SEBI Act and regulation 3 (c) and (d) of PFUTP RegulationsSEBI Order
An ex-parte order was passed to protect the interests of investors and preserve the safety and integrity of the securities market, SEBI said, granting the three Ghais 21 days to file a reply or seek in-person hearings.
Besides the bar or trading in securities and the freezing of their bank accounts, SEBI has also impounded the banks accounts of the Ghais to the extent of Rs 2.95 crore—the value of gains made by them.
Noting that Hemant Ghai is employed with CNBC-TV18, the regulator has directed the entity to notify its viewers that an interim order has been passed against Ghai. CNBC-TV18 is among a network of channels owned by Reliance Industries Ltd.
Hours after the regulator’s order was posted on it website CNBC-Awaaz said in a statement that Hemant Ghai has been terminated with immediate effect.