In a significant crackdown on fraudulent trading practices, the Securities and Exchange Board of India (SEBI) has barred CNBC Awaaz's former anchor Hemant Ghai, his wife Jaya and mother Shyam Mohini Ghai from accessing the securities markets for five years. Mr Ghai and his wife are directed to disgorge Rs6.16 crore earned from the ill-gotten trades. SEBI also imposed a penalty of Rs1.35 crore on four, including Mr Ghai, his wife Jaya, MAS Consultancy Service and Motilal Oswal Financial Services Ltd.
The new SEBI order comes in the wake of a detailed investigation into suspicious trading activities that exploited non-public information related to stock recommendations aired on the channel.
The regulator found that Mr Ghai, leveraging his position as a television anchor, executed trades through the accounts of his wife and mother in a manner that aligned with his on-air stock recommendations.
In the order, Ashwani Bhatia, whole-time member (WTM) of SEBI says, "The systematic correlation between the timing of the recommendations and the surge in trading activity further confirms their materiality, leaving little room for doubt regarding their effect on the market."
The investigation revealed that the trades in the accounts of Jaya Ghai and Shyam Mohini Ghai were synchronised with the recommendations made by Mr Ghai during his shows on CNBC Awaaz. This practice allowed the family to gain substantial profits from market movements caused by the anchor’s public recommendations.
Mr Ghai was hosting various shows; Stock 20-20 (7:20am between Monday to Friday), Munafe Ki Taiyari Pehla Sauda and Kamai Ka Adda. Stock 20-20 is described as a show that features recommendations on certain stocks to be bought and sold during the day.
The probe covered trades executed between 1 January 2018, and 13 January 2021, including both BTST (buy today, sell tomorrow) and intraday trades. SEBI's findings indicated that the illegal gains made from these trades amounted to Rs6.15 crore, including Rs2.95 crore identified in the interim order. The impounding order also directed the recovery of an additional Rs3.19 crore, along with interest, from the accused entities.
The trades were done through an authorised person of Motilal Oswal Financial Services, namely, MAS Consultancy from Mehsana in Gujarat.
Apart from the five-year market ban, the order directs the impounding of illegal gains and prohibits the Ghais from associating with any listed company or intermediary registered with SEBI during the debarment period.
SEBI investigation highlighted the impact of the recommendations made by Mr Ghai on the price and volume of stocks, showing a consistent pattern of increased trading activity immediately after the recommendations were aired.
SEBI stressed that these practices violated the provisions of the SEBI Act, 1992, and the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003.
In response to the allegations, Mr Ghai argued that the recommendations were based on publicly available information and that the show was meant to disseminate news rather than influence stock prices. However, the market regulator found that the material impact on trading volume and price, immediately following the recommendations, could not be attributed to mere coincidence.
While Mr Ghai and his wife are slapped with a penalty of Rs50 lakh each, MAS Consultancy Service and Motilal Oswal Financial Services are asked to pay a fine of Rs30 lakh and Rs5 lakh, respectively.
In September 2022, SAT set aside an interim ban on the former TV anchor and his family imposed by SEBI for fraudulent trading practices pending investigation. The tribunal directed the SEBI WTM to hear the matter within six weeks from the date of filing the reply by the appellant. However, the appellate tribunal said that the alleged unlawful gain of Rs2.95 crore made by the Ghais will remain in the escrow account during the pendency of the investigation by SEBI.
The tribunal noted that the Ghais have been restrained from dealing in the securities market since 13 January 2021, and more than 18 months have elapsed; further, SEBI has decided to re-investigate the matter for which a timeline of six months has been given.
