Former CNBC Awaaz anchor, family banned by Sebi for insider trading | Stock Market News

The Securities and Exchange Board of India (Sebi) has barred former CNBC Awaaz news anchor Hemant Ghai, his wife Jaya Hemant Ghai, and his mother Shyam Mohini Ghai from participating in the securities market for five years, effective immediately, for engaging in fraudulent trading practices.

The regulatory body has also ordered Hemant and Jaya Ghai to disgorge ₹6.1 crore, along with 12% simple interest from 31 March 2020, representing the profits they gained through insider trading; in addition to penalties of ₹50 lakh each.

Insider trading & correlation

Sebi had initiated investigation into the Ghai family in 2021 which revealed a high degree of correlation between stock recommendations made by Hemant Ghai on CNBC Awaaz and trades executed in the accounts of his wife and mother. The regulator found that 81% of the trades and approximately 85% of the profits made by Jaya and Shyam Mohini Ghai were directly linked to Hemant Ghai’s recommendations.

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While Sebi initially issued interim and confirmatory orders the Ghai family in 2021 and 2022 respectively, the regulator passed a reinvestigation order on 22 July 2022. After the re-investigation, Sebi released the final order on 19 March.

“Anchors have a position of privilege…However, Hemant Ghai unfairly used this privilege to his own advantage,” stated Ashwani Bhatia, Sebi whole time member, in the order. “When high profile TV anchors hired by leading business channels, entrusted with informing and educating investors, exploit material non-public information for personal gain, they betray the very trust that underpins market transparency.”

The investigation, which spanned from 1 January 2018 to 13 January 2021, uncovered that Hemant Ghai had operational control over his wife’s and mother’s trading accounts. His mobile number, email ID, and bank credentials were linked to these accounts. 

Sebi also found frequent communication between Hemant Ghai and a dealer at MAS Consultancy Service, who executed the trades, which further corroborated their findings. 

The regulator observed a significant surge in trading activity immediately following his recommendations. This, according to Sebi, indicated that his words directly influenced investor behavior.

The order revealed that the trading activity in the Ghai family’s accounts abruptly ceased after National Stock Exchange (NSE) and MOFSL raised alerts, suggesting an attempt to avoid detection.

Furthermore, after trading restrictions were lifted in 2022, Jaya Ghai’s profits plummeted, demonstrating that her trading success was dependent on access to privileged information.

Sebi fined MAS Consultancy Service, an Authorised Person for Motilal Oswal Financial Services Ltd (MOFSL) with a penalty of ₹30 lakh for submitting fabricated order instruction sheets to the regulator and failing to maintain proper records of trade instructions.

Sebi concluded that MAS not only facilitated the fraudulent trades but also attempted to conceal the misconduct by submitting fabricated documents. “By allowing trades placed by Hemant Ghai to be camouflaged as being placed by his wife and mother, MAS provided a cover that enabled him to exploit material non-public information for personal gains,” the Sebi order stated.

Stock brokerage MOFSL was fined ₹5 lakh for lapses in supervisory responsibilities. 

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Sebi reasoned that despite receiving alerts of potential pump-and-dump activity and internal warnings, the brokerage did not conduct adequate due diligence. 

“MOFSL received alerts from NSE regarding potential pump-and-dump activity in Jaya Ghai’s trading account and internal alerts regarding consistent profits,” Sebi noted; however, when MOFSL sought clarification from MAS, it accepted the agent’s denial of wrongdoing without further scrutiny.

While the market watchdog determined that MOFSL’s failures were due to negligence and non-compliance rather than deliberate fraud, it held the firm in violation of Sebi circulars related to market access and unauthorized trading and proceeded to impose a penalty.