SEBI asks business channel's guest experts to fork out Rs 7.41 cr for 'unlawful gains'

Market regulator Securities and Exchange Board of India (SEBI) on Thursday, in an interim order, imposed fine of Rs 7.41 crore on 15 guest experts who appeared on a business channel for "unlawful gains on the basis of advance information". 

Action has been taken against 15 experts appearing on Zee Business between February 1, 2022 and December 31, 2022. The experts are Nirmal Kumar Soni, Partha Sarathi Dhar, SAAR Commodities Private Limited, Manan Sharecom Private Limited, Kanhya Trading Company, Nitin Chhalani, Rupesh Kumar Matoliya, Ajaykumar Ramakant Sharma, SAAR Securities India Private Limited, Ramawatar Lalchand Chotia, Kiran Jadhav, Ashish Kelkar, Mudit Goyal, Himanshu Gupta, Simi Bhaumik.

As per SEBI's findings, the guest experts shared their recommendations on stocks or contracts in advance with certain entities before the broadcast on the channel.

SEBI categorised the experts into three categories: Profit Makers, Enablers and Guest Experts.

SEBI said these experts made profit to the tune of Rs 7.41 crore, which is "unlawful since they had got advanced information, directly or indirectly, about the impending recommendations in an unfair manner (to the detriment of general investors). They have used this advance information to make profit by trading on the basis of such advance information knowing that investors would act on the recommendations and the price and volume would move in the expected direction enabling them to make profit".

“I note that the Noticees have played specific roles at various stages which have, prima facie, been found to be in violation of the SEBI Act and the regulations made thereunder. Analysis of evidences gathered in the course of investigation reveal that Guest Experts shared advance information pertaining to recommendations to be made by them with Profit Makers, before the broadcast of the recommendations on Zee Business,” said Kamlesh Varshaney, Whole Time Member, SEBI, in his order.

The Profit Makers, having received the information, took position in the scrip/contract and reversed the position or squared off the position upon broadcast of the recommendation on Zee Business, SEBI said. The profit was then shared with guest experts as per prior understanding.

"The popularity of these shows had equipped Noticees with a deep awareness of the substantial impact these recommendations wielded over prices and trading volumes of scrip/contract  recommended. Around the time of the broadcast of recommendations of the Guest Experts, there was favourable movement in scrip/contract price and trading volumes, aligned to the  recommendation  made  by Guest  Experts. The average  traded volume around the recommendation was substantially higher as compared to the average traded volume during the preceding 15-minute period prior to the broadcasting of recommendations," said Varshney.

"Unlawful gains made by these Profit Makers come, directly or indirectly, from the  pockets  of  innocent investors who follow the advice of Guest Experts unaware of the fraudulent scheme. Hence, it is necessary that whenever such schemes are noticed, steps are taken to intervene and stop further damage to securities market," SEBI said in its order.

SEBI said, “...certain entities indulged in fraudulent and unfair acts and unlawfully enriched themselves by taking advantage of being in a position to influence innocent investors.”

The market regulator analysed SMS, Whatsapp, and Telegram chats of these experts along with their bank account details.

SEBI, however, has provided 3 months to the experts/entities to close their open positions in the derivatives market.  

SEBI has also asked Zee Media to preserve and maintain all records, documents, material and video records along with their content, and concerned shows till the final order is passed.