The Securities and Exchange Board of India (Sebi) banned CNBC Awaaz show host Hemant Ghai, his wife and mother from the capital market for alleged fraudulent trading practices.
According to the Sebi order issued by MadhabiPuri Buch, the whole-time member (WTM), by resorting to front running, the CNBC Awaaz anchor made a profit of Rs 2.95 crore through total 82 trades between January and May 2019 (79 trades) and three trades were carried out in February 2020. Ghai’s family has pocketed a hefty sum of Rs 3.60 lakh per trade during the period.
An analysis of the trades undertaken by him as mentioned in the Sebi order indicates that the BTST recommendations he made in his show were the majority of not so liquid stocks and were driven by the market operators.
Ghai is the first media person to be banned by Sebi, who has been found guilty prima-facie in front running. Till now all the persons found guilty of such violations were either the operators or were associated with the capital market intermediaries.
In an interim order, the capital markets regulator has also directed Ghai to cease and desist from undertaking any activity related to giving investment advice, publishing of research reports related to the securities market, till further directions. Sebi has also directed to impound the proceeds of Rs 2.95 crore generated by fraudulent trades carried out by him.
Sebi order said Hemant Ghai was acting on the advance information about the recommendation to be made on the “stock 20-20” show, co-hosted by him, and that he directly or indirectly used it to his advantage. The show features recommendations on certain stocks to be bought today and sold tomorrow (BTST) for the investors/viewers.
It was reported that the Network18 group that runs CNBC Awaaz has terminated Ghai with immediate effect.
The statement issued by the Ghai’s employer, CNBC TV 18 said, “All employees of Network18 are required to pledge themselves to a code of conduct which, among other things, expressly forbids the manipulation of prices of listed securities. Mr Ghai was also a signatory to the code of conduct”.
Network18 takes its commitment to honesty and integrity seriously. “We will not tolerate any behaviour which does not conform to the highest standards of professional and ethical conduct. In keeping with our values, we have terminated Mr Ghai within hours of becoming aware of the Sebi order,” it said in a statement.
The stock market regulator found that Hemant along with his wife Jaya Hemant Ghai and mother Shyam Mohini Ghai employed a scheme to conduct fraudulent or unfair trading based on the advance information pertaining to recommendations to be made in the show “stock-20-20″.
Sebi analysed the trades undertaken by the trio for the period between January 1, 2019, and May 31, 2020 and a high correlation of their trades was observed with the stocks recommended in the show, the next day. It thereby generated the proceeds of Rs 2.95 crore by carrying out fraudulent trading in respect of recommended stocks.
Sebi found that shares were consistently purchased in the trading accounts of Hemant Ghai’s wife and mother, one day prior to the day of recommendation on the show. To capture the significant benefits from the price movement caused by the recommendations on the show, they then sold their shares as soon as the market opened on the day of the recommendation and consequently, earned profits and perpetrated a fraud upon the market and the viewers of the show, Sebi said.
Sebi said Hemant was prima facie using the trading accounts of his wife and mother. Besides, Jaya Hemant Ghai and Shyam Mohini Ghai are also liable for the violations, related to the trades done/facilitated in their accounts by him. Through such activities, they violated the provisions of Sebi”s PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, the regulator said. These individuals have been “restrained from buying, selling or dealing in securities, either directly or indirectly, in any manner whatsoever till further directions”, the regulator said.
According to Sebi, 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.
“Hemant Ghai has approximately 1,16,000 followers on Twitter on the back of his popularity,” it said. The same is detrimental to the development of the securities market and qualifies as “irreparable injury”. The objective of Sebi as enshrined in the Sebi Act is not only the protection of investors but also orderly development and protecting/preserving the integrity of the securities market, it said.
Sebi also sent copies of the order CNBC–TV 18 and the News Broadcasting Standards Authority (NBSA) for information and necessary action, if any, in terms of the code of conduct applicable to Hemant Ghai. In addition, CNBC-TV18 has been advised to inform viewers of the relevant shows, about the order.
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