SEBI restrains the Co-Host of CNBC Awaaz "Stock 20-20" Show from buying, selling or dealing in securities

SEBI restrains the Co-Host of CNBC Awaaz "Stock 20-20" Show from buying, selling or dealing in securities

In the matter of CNBC Awaaz "Stock 20-20" Show co-hosted by Mr. Hemant Ghai, the Whole Time Member of SEBI has restrained Mr. Hemant Ghai, Ms. Jaya Hemant Ghai and Ms. Shyam Mohini Ghai from buying, selling or dealing in securities, either directly or indirectly, in any manner whatsoever till further directions.

Herein, on analysis of the trading pattern of 2 entities viz. Ms. Jaya Hemant Ghai and Ms. Shyam Mohini Ghai for the period between January 1, 2019 to May 31, 2020 (Relevant Period), high correlation of the trades of the aforesaid entities was observed with the recommendations furnished in the show Stock 20-20 (Show) aired on news channel CNBC Awaaz.

Based on this, Securities and Exchange Board of India (SEBI) conducted a preliminary examination.The investigation brought forth the fact that Ms. Jaya Hemant Ghai and Ms. Shyam Mohini Ghai had undertaken a large number of Buy-Today-Sell-Tomorrow (BTST) trades during the Relevant Period in synchronization with the recommendations made in the Show.

Shares were bought on the previous day to the recommendations being made on the stock 20-20 show and sold immediately on the recommendation day. Trades were executed in the trading accounts of Ms. Jaya Hemant Ghai (spouse of Mr. Hemant Ghai) and Ms. Shyam Mohini Ghai (mother of Mr. Hemant Ghai). Also, proceeds amounting to Rs. 2,95,18,680/- were earned just through the limited number of trades examined during the Relevant Period.

The Whole Time Member (WTM) explained the concept of BTST by stating that it stands for Buy Today Sell Tomorrow trades and these are trades where the investor buys shares on 'T' day and sells it on T+1 day i.e., sells before the buy trade is settled, i.e., before the shares are delivered in his demat account and before he makes payment for his purchase of shares.

It was mainly observed that the scheme was per se unfair as the trades were orchestrated trades, taking undue advantage of the advance information regarding the recommendation to be given on the Show co-hosted by Mr. Hemant Ghai.

Buying of shares while in possession of the advance information disrupts the informational level playing field which is the edifice of securities market. Disrupting the level playing field and subsequent unfair exploitation of buying interest and price rise is a misuse of the market mechanism. This is also a prima facie unfair trade practice as it undermines the ethical standards and good faith dealings as many investors rely on the recommendations given on the Show.

Further, the trades that were executed from the trading accounts of Ms. Jaya Hemant Ghai and Ms. Shyam Mohini Ghai, they did not conform to the fair and transparent principles of trades in the stock market.

Ordinarily, orders in the securities market are executed at prices determined by the market forces of demand and supply. In the instant case, buy positions were created in the first leg of BTST trades while in possession of information which is prima facie, generally not available to the investors i.e., information that there will be a buy recommendation in the said scrip on the Show on the next day, which would have an immediate positive impact on the price of the scrip.

Hence, prima facie the described scheme was unfair and did not conform to the ethical standards and fair and transparent principles of dealing in the securities market. Hence, it was prima facie, observed that Mr. Hemant Ghai, Ms. Jaya Hemant Ghai and Ms. Shyam Mohini Ghai had prima facie indulged in an unfair trade practice in the securities market.

The same had resulted in prima facie violation of provisions of regulation 4 (1) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003).

By purchasing shares in the accounts of Ms. Jaya Hemant Ghai and Ms. Shyam Mohini Ghai for which buy recommendation was 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 that the scheme had been devised for their personal gains. It was prima facie, found that such trading pattern was a fraudulent scheme prevented under 12A (b) of SEBI Act and regulation 3 (c) and (d) of PFUTP Regulations.

Therefore, Mr. Hemant Ghai, Ms. Jaya Hemant Ghai and Ms. Shyam Mohini Ghai prima facie, violated the provisions of Sections 12A (b) of SEBI Act (Securities and Exchange Board of India Act, 1992) and regulation 3 (c) and (d) of PFUTP Regulations.