On Thursday, markets regulator SEBI pulled up a bunch of guest experts who pocketed close to ₹8 crores by offering stock recommendations on Zee Business’ shows.
So in today’s Finshots, we tell you how these folks pulled off such a scam.
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Zee Business is the number one ranked business channel in India as per data from the Broadcast Audience Research Council (BARC).
And guess the most popular shows?
Anything to do with the stock market, of course — ones such as 'First Trade' and '10 ki kamai'. Everyone wants to get a stock tip from the 'experts' who feature on the shows with the hope of making some quick bucks.
But looks like a few of these stock experts had ulterior motives when they made an appearance. They had a 'get rich quick' scheme in mind of their own. And the market regulator SEBI points out that some of them made close to ₹8 crores in profit in under a year!
So how did they do it, you ask?
In one word — front-running.
See, we told you some of Zee Business' most popular shows involved stock recommendations. These even included the BTST (Buy Today Sell Tomorrow) kind. Now these shows would invite a certain set of expert stock market guests. For instance, Kiran Jadhav and Ashish Kelkar who were also business partners, ran a show called Kiran Ka Kamal (Kiran’s Magic). Himanshu Gupta’s show was called Hitman Himanshu and Simi Bhaumik had a show called Simi Ke Non Stop Shares (Simi’s Non Stop Shares). And while Mudit Goyal was not even a SEBI-registered Research Analyst, he recommended stocks on a show called Mudit Ke Munafe (Mudit’s Profits).
And maybe their TV influence planted an evil idea in the head of Nirmal Soni, the mastermind behind the whole fraudulent scheme. He's someone who initially worked with a stock broker and then struck out on his own. Maybe his experience helped him build connections in the industry too. And soon, he may have been encouraged to approach guests whose stock shows were a buzz on Zee Business.
His scheme was simple. He’d take stock recommendations from these guest experts a few minutes before they’d appear on TV. Then he’d pass this information to his network in a couple of stockbroking entities.
So if a guest expert told Nirmal that they’d be recommending viewers to buy a certain stock, his network would go ahead and lap up those shares before the guest went on air. The stock recommendation would influence the public to invest in them immediately. And that would increase trading volumes and in turn, increase stock prices too. As soon as that happened, Nirmal’s associates would sell the stock and pocket a cool profit.
And if you’re wondering how much influence these TV guests had on the stock market, here are a couple of mind-blowing figures that SEBI highlighted in its interim order.
When Simi Bhaumik recommended viewers to buy the stock of Balrampur Chini in August 2022, trading volumes rose a whopping 300% as soon as Simi asked viewers to buy the stock. Everyone jumped in.
And this isn’t the only case. Most other examples that SEBI quoted in its order had similar spikes in trading volumes.
The end result?
A group of 10 people including the guest experts made a total of ₹7.4 crores in a span of 11 months. Folks like Nirmal Soni ended up making nearly 300% more profits from these recommendations than he’d make from his regular trades. That percentage was a whopping 1,900% for Nirmal’s company Manan Sharecom.
And SEBI has barred all of them and others who helped pull off the stunt from trading in the markets until it passes a final verdict. Meanwhile, they also have to pay back the crores of profits they illegally made.
Now here’s the thing. Journalists or TV personalities front running isn’t new. In 2021, CNBC Awaaz’s news anchor Hemant Ghai and his family were barred from trading in the stock market for doing something similar. And despite SEBI’s strong laws against the practice, it hasn’t stopped.
So what encourages them?
Here’s how a widely published economic commentator, Vivek Kaul put it in Newslaundry:
When I first started working for a newspaper in October 2005, it was very common for reporters to write a piece on a particular company and inform a stockbroker about it. They knew that their story would move the price of the stock the next day, after the story had appeared in the newspaper and people had read it. The broker would take a position in the stock because he had advance information.
The next day, after the story appeared and the stock moved, thanks to the news item, a profit was made and was shared between the broker and the reporter. Sometimes, the reporters were so blatant that they would call brokers directly from their office phone numbers.
Around a decade back, the business media started getting its act together and got into contracts with journalists which did not allow them to buy a stock today and sell it tomorrow. If a journalist bought a stock, he had to hold on to it for a while. This ensured that any front running moved on to accounts of mothers, wives and girlfriends. The smartest of the lot just took a cut for every piece of information they provided a stockbroker with, without getting involved in the buying and selling of the stocks. The payment to them was made in cash.
So yeah, maybe the guest speakers at Zee Business too felt confident that appointing mules, who weren’t related to them, would help them make ill-gotten gains from their TV appearances.
The only catch?
Simi Bhaumik, one of the guests also shared guest experts’ recommendations with her husband before she appeared on TV, who in turn made 90% of his entire trading profit from these nudges.
Now that's an amateur move. And maybe that could've given SEBI a cue to start investigating. We don’t know.
All we know is that front-running is illegal. And SEBI actually built an AI tool to scan how stock recommendations from TV shows affect trading volumes. If it found anything fishy about an unusual spike in trading volumes because of certain shows, it would then go out and investigate. Now, SEBI kicked off this tool in December 2022. And coincidentally, that’s also the month until which this investigation on Zee Business' guest experts suspected front-running.
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