Insights by: Sunny Raheja & Jaydeep Saha
In the wake of another stock market scandal involving purported “TV Experts”, the Securities and Exchange Board of India (SEBI) has issued an interim order accompanied by a show cause notice to 15 individuals and entities like Kiran Jadhav, Ashish Kelkar, Himanshu Gupta, Mudit Goyal, Simi Bhaumik and Kanhya Trading Company. This action stems from allegations of market manipulation, unfair trade practices, defrauding investors, and other regulatory transgressions. It is purported that these individuals, leveraging their status as “guest experts” on the “Zee Business TV channel”, engaged in unlawful activities that contravened several SEBI regulations.
The accused, purportedly acting as purported experts of stock markets, allegedly colluded with traders to illicitly profit from recommendations made during their appearances on the Zee Business TV channel. SEBI’s investigation has unveiled that the unlawful gains derived from this nexus between the aforementioned guest experts and other involved parties amounted to INR 7.41 crore within a span of less than a year, commencing from February 1, 2022, to December 31, 2022. Following over a year of meticulous observation of their conduct, SEBI has deemed these individuals culpable subsequent to regulatory scrutiny.
The modus operandi of this deceitful scheme
During the aforementioned period, all five offenders were hosting individual programs on Zee Business TV channel, each bearing their respective branded titles, with Kiran Jadhav and Ashish Kelkar presented stock recommendations under the banner “Kiran Ka Kamal“, while Himanshu Gupta operated under the moniker “Hitman Himanshu“, Mudit Goyal, despite lacking registration as a Research Analyst (RA) with SEBI, offered stock suggestions under the label “Mudit Ke Munafe“, and Simi Bhaumik hosted a show named “Simi Ke Non Stop Shares“.
In this timeframe, trader Nirmal Kumar Soni (“Soni”) purportedly proposed a scheme wherein the guest experts would disclose forthcoming recommendations intended for television broadcast to Soni, who would then engage in pre-emptive trading based on these suggestions. Soni allegedly promised a portion of the resulting profits to these individuals.
Soni purportedly utilized the advanced knowledge of stock recommendations provided by these ‘experts’ to execute trades through the accounts of SAAR Commodities Private Limited, Manan Sharecom Private Limited, and Kanhya Trading Company. Additionally, Nitin Chhalani of Kanhya Trading, Rupesh Kumar Matoliya, Ajaykumar Ramakant Sharma, and Ramawatar Lalchand Chotia of SAAR Commodities, along with the aforementioned entities, have been implicated in aiding and abetting the alleged wrongdoing.
Simi Bhaumik’s involvement stands out as particularly egregious among the guest experts, as she not only profited from the unlawful gains shared by Soni but also facilitated her husband, Partha Sarathi Dhar, in engaging in similar trading activities, resulting in further illegal profits.
All five offenders—Kiran Jadhav, Ashish Kelkar, Himanshu Gupta, Mudit Goyal, and Simi Bhaumik—allegedly shared advanced information regarding forthcoming recommendations slated for broadcast on the television channel, which was subsequently relayed to both Soni and Simi’s husband, Partha Sarathi.
The entire operation was conducted with a high degree of sophistication, involving the utilization of multiple phone numbers, SIM cards registered under false identities, pseudonyms in address books to conceal co-offenders’ identities, as well as encrypted and coded communication. The coordinated actions of the five guest experts, in conjunction with Soni and Partha Sarathi, suggest that the operation was orchestrated as a deliberate and sustained racket, rather than a mere lapse in moral judgment due to short-term temptation.
So far, SEBI has instructed the offenders to return the money they unlawfully gained, plus any interest that has accumulated. Additionally, they have been prohibited from accessing the securities market and engaging in securities-related transactions for an appropriate duration. Registered RAs involved have also been barred from conducting any research advisory activities.
Regulatory Loopholes and Accountability
In an environment where individuals are not mandated to hold SEBI registration to dispense stock recommendations publicly, the engagement of unregistered entities like Mudit Goyal as expert guests on platforms such as the Zee Business TV channel raises concerns regarding regulatory oversight. Furthermore, the existing regulatory framework appears to lack commensurate stringency between registered entities making public recommendations and their unregistered counterparts, despite the prevalence of self-proclaimed experts disseminating advice to vast audiences. Despite allegations of prolonged market manipulation and investor defrauding, individuals implicated in such misconduct seemingly evade incarceration, facing penalties limited to the disgorgement of profits and market access prohibition. However, even if the crime has been proven, SEBI’s directive in para no. 177 of its Interim Order stated that the implicated parties to justify why penalties under Sections 11B (2) and 11(4A) read with Section 15HA of the SEBI Act, 1992, should not be imposed on them for alleged violations of the SEBI Act, 1992, and the Regulations framed thereunder including, SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003.
Advice to Investors.
As a prudent investor, it’s crucial to avoid trading solely based on recommendations to avoid falling victim to scams. In life, particularly in investment matters, nothing is truly free. Therefore, it is advisable to prioritize conducting a thorough analysis before investing in a specific stock or fund. Engaging the services of a reputable financial advisor to carefully plan investments is often a wise decision. Retail investors should steer clear of being lured by free tips, as there are individuals who prey on unsuspecting investors. It is essential to recognize that earning money requires diligent effort and precautions should be taken to safeguard it. Sharing ‘influencing stock recommendations’ under the guise of educational purposes is not a foolproof strategy and may lead to deception. This deceptive practice is commonly observed among business news channels and certain financial influencers. However, it is worth noting that some financial influencers genuinely contribute to educating retail investors. Investment decisions should not be based solely on information from news channels and social media platforms. Before acting on any advice, it is important to verify whether the individual providing the recommendations is registered with SEBI as an RA, ensuring compliance with legal requirements. Furthermore, it is crucial to assess whether the expert’s recommendations are supported by thorough research and analysis or if they are part of a fraudulent scheme. Genuine experts typically provide reasoned analysis rather than making unsubstantiated promises.
Conclusion
SEBI’s swift response in this matter and recently in other cases underscores the efficacy of its surveillance system and its unwavering commitment to investor protection. Led by Madhabi Puri Buch, SEBI has become a trusted regulator in India’s capital markets, employing advanced technology and stringent enforcement measures to uphold market integrity. Through proactive measures and decisive actions, including the imposition of penalties and restrictions on wrongdoers, SEBI reaffirms its dedication to fostering fair and transparent trading practices, thereby enhancing investor confidence and safeguarding the integrity of India’s financial markets.
Under Buch’s leadership, SEBI has emerged as a beacon of trust and confidence, employing a proactive approach to address regulatory loopholes and hold perpetrators accountable. By imposing sanctions and limitations on culpable parties, SEBI sends a clear message that unethical behavior will not be tolerated. Investors can take solace in SEBI’s vigilant oversight and proactive measures aimed at preserving market integrity, ensuring a level playing field for all market participants, and fostering a conducive environment for sustainable growth and development in India’s financial markets.
