The Securities Appellate Tribunal (SAT) has set aside a securities market interim ban on former TV anchor Hemant Ghai and his family imposed by regulator Securities and Exchange Board of India (SEBI) for
fraudulent trading practices pending investigation.The tribunal directed the SEBI’s whole-time member (WTM) to hear the matter within six weeks from the date of filing the reply by the appellant. However, the appellate tribunal said that the alleged unlawful gain of Rs2.95 crore made by Ghais will remain in the escrow account during the pendency of the investigation by the SEBI.
The tribunal noted that Ghais have been restrained from dealing in the securities market since 13 January 2021, and more than 18 months have elapsed and further SEBI has decided to re-investigate the matter for which a timeline of six months has been given. Quashing the SEBI’s order, Justice Tarun Agarwala, presiding officer, SAT said the WTM of SEBI would hear the matter within six weeks from the date of filing the reply by the appellant and order shall be passed within two months thereafter.
In case, the investigation exceeds beyond the timeline of six months given by SEBI, it would be open to the appellants—Hemant Ghai, his wife Jaya Hemant Ghai and his mother Shyam Mohini—to move an appropriate application for reconsideration of this direction, the SAT said in its order passed on 25th August.
The ruling comes after the Ghais approached the appellate tribunal against an order passed by SEBI in July, whereby the regulator disposed of a show cause notice issued to the former TV anchor and his family in February for alleged manipulative trades and decided to re-investigate the matter. It was decided to complete the investigation within six months.
Also, SEBI directed that the deposit of Rs2.95 crore toward alleged unlawful gain will remain in an escrow account and that the interim order passed in January 2021, restraining Ghais from buying, selling or dealing in securities would continue during the reinvestigation period.
The appellants are basically aggrieved by the continuation of the interim order issued in January 2021 that prohibited them from the securities market. The direction was confirmed in September 2021. However, there was no argument on merits of the case by the appellant.
“We are in agreement with the contention of the appellant that the restraint order cannot continue indefinitely. The fact that whether the appellant has violated the SEBI laws is yet to be adjudicated and, therefore, on prima facie basis the restraint order cannot continue indefinitely otherwise it would become arbitrary and in violation of the appellants fundamental right to trade and do business,” SAT said in its ruling.
Accordingly, SAT said, "The interim directions restraining the appellants from buying, selling or dealing in securities either directly or indirectly, in any manner whatsoever is set aside".
Further, the direction issued against Hemant Ghai to cease and desist, directly or indirectly, any activity related to giving investment advice, sell or buy recommendations, and publishing research reports related to the securities market has also been set aside.
The regulator had conducted a preliminary examination of the trades executed by Jaya Hemant Ghai and Shyam Mohini Ghai, which revealed violations of PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) rules.
The preliminary examination revealed that Hemant Ghai was buying shares of various companies in the name of his wife and mother on the previous day. He was a financial adviser and was hosting various shows on the TV channel and he would make a recommendation on the next day before the start of the exchange recommending those very stocks which he had purchased the previous day.
As a result of his recommendations on the TV show, fluctuations in those very scrips were noticed in which Hemant Ghai made a recommendation. As a result of this, movement of the trades by other investors Hemant Ghai offloaded the shares, which he had purchased in the name of his wife and mother under the BTST trades (Buy Today Sell Tomorrow) and made unlawful gains.
