Securities and Exchanges Board of India's (Sebi) order on February 8, 2023, targeting 15 entities associated with illicit trading practices has shed light on serious malpractice in the financial markets. Among these 15 entities, five were guest experts featured on Zee Business, another five were 'profit makers' who had advanced knowledge of the recommendations from experts, and the remaining five were enablers providing technical support for illicit activities. These profit makers allegedly made unlawful gains to the tune of Rs 7.41 crore by leveraging stock tips shared in advance by guests and later shared the profit with the guests. Sebi has ordered the guests and profit makers to repay the whole amount and barred them "from buying, selling or dealing in securities, either directly or indirectly, in any manner whatsoever until further orders".
The modus operandi of the scheme involved experts sharing the stock tips in advance to profit makers, before appearing on the Zee Business show, allowing profit makers to exploit market movements. Sebi's investigation into trading activities linked to Zee Business shows recommendations from February to Dec 2022 and found a high correlation between the trading activities of certain entities and the stock recommendations given by guest experts. Upon investigation, certain electronic devices were seized and statements were recorded under oath proving guest experts shared advance information of stock recommendations before the broadcast of the recommendations on Zee Business news channel.
After receiving the information, profit makers took a position in the scrip or contract and reversed the position or squared off the position after the broadcast of the recommendation on Zee Business. The experts were able to make huge changes in the volume with their recommendations. For instance, Sebi mentioned that for one scrip the average trading volume in the 15 minutes leading up to the recommendation was 60,147 shares. During the recommendation time and the following 2 minutes, the trading volume surged to an average of 6,31,800 shares. The profit thus made was then shared with guest experts as per prior understanding.
Alleged accused include Simi Bhaumik, Mudit Goyal Himanshu Gupta, Ashish Kelkar, Kiran Jadhav, Ramawatar Lalchand Chotia, SAAR Securities India Private Limited, Ajaykumar Ramakant Sharma, Rupesh Kumar Matoliya, Nitin Chhalani, Kanhya Trading Company, Manan Sharecom Private Limited, SAAR Commodities Private Limited, Partha Sarathi Dhar and Nirmal Kumar.
"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...Many experts are spreading financial literacy in India and empowering investors to make their own decisions...the same cannot be said about a few other experts who take advantage of their mass following to make unfair profits by misguiding innocent investors,” Sebi said in its order.
Basavaraj Tonagatti, a Certified Financial Planner and Sebi RIA said, "Many investors blindly follow social media and TV media but one must always take note of one's own requirements because your financial life is unique. Your needs are unique and your risk appetite is unique. Hence, one must stay away from implementing any investment ideas recommended on a public platform.”