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Fraudulent trading: SEBI confirms earlier ban order against former CNBC Awaaz show host

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Former host of Stock 20-20 show Hemant Ghai’s wife and mother were alleged to have indulged in trades based on stock recommendations made in the show

The Securities and Exchange Board of India (SEBI) has confirmed an earlier order that barred former CNBC Awaaz show host Hemant Ghai along with his wife and mother from the securities market for allegedly indulging in fraudulent and unfair trade practices.

On Thursday, SEBI whole-time member Madhabi Puri Buch issued a 20-page order that confirmed the directions of the interim order issued on January 13.

“I note that a detailed investigation in the matter is in progress which may bring out additional roles of omission or commission, of the noticees, if any, in detail, depending on the material and after considering the facts and veracity of their submissions,” stated the order issued on Thursday.

The roots of the case go back to January 2019 when the capital market regulator analysed the trading pattern of two individuals – Jaya Hemant Ghai and Shyam Mohini Ghai. SEBI analysed their trades during the period from January 1, 2019, to May 31, 2020, and found that there was a huge correlation between their trades and the recommendation made in the show Stock 20-20, which was aired on CNBC Awaaz, which was hosted by Hemant Ghai.

Jaya Ghai is the wife of Hemant Ghai, while Shyam Mohini Ghai is his mother.

SEBI’s preliminary examination found that Hemant Ghai was hosting/co-hosting the show wherein recommendations were being made regarding stocks to be bought or sold during the day. His wife and mother, however, bought stocks a day before the recommendations were made and sold soon after the show aired the recommendations.

Further, the trades were done through the trading accounts of Jaya Hemant Ghai and Shyam Mohini Ghai, which, as per SEBI, violated the SEBI Act and also the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations or the PFUTP Regulations.

According to the findings of SEBI, the duo earned proceeds amounting to Rs 2.95 crore through the limited number of trades examined during the period under probe.

“โ€ฆ it was held that Mr Hemant Ghai had advance information on the buy recommendation of shares to be made on the next day and the trades in the trading accounts of Ms Jaya Hemant Ghai and Ms Shyam Mohini Ghai were prima facie, designed to take advantage of the advance information of the buy recommendation given on the Show, as the buy recommendation would have a positive impact on the price and volume of the shares,” stated the SEBI order.

“It was prima facie observedโ€ฆthat M Hemant Ghai, pursuant to a prima facie scheme was controlling and operating the trading accounts of Ms Jaya Hemant Ghai and Ms Shyam Mohini Ghai,” added the order.

The interim order also barred Hemant Ghai from undertaking any activity related to giving investment advice, stock recommendations or publishing any research report related to the securities market.

“Scalping and other manipulative practices by TV Anchors or influencers, writing or recommending on financial issues are serious problems,” said Sumit Agrawal, Founder, Regstreet Law Advisors & a former SEBI law officer.

“Capacity to induce masses has no correlation with the duty to disclose the personal trading generally unless there exists a fiduciary or contractual duty. In the US, there have been cases where ‘duty of disclosure to viewership’ has been read as a facet of ‘fiduciary duty’ and has been criticised too. In India, this is growing though this is not the first case. In the past, in the case of Mathew Easow and CNBC, before the Supreme Court could set the parameters of law in such cases, unfortunately, Mr Easow expired and the case had to be abated. Perhaps, this time, SAT and Supreme Court will test and set the law in such cases,” added Agrawal.

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