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The Securities and Exchange Board of India (Sebi) has recently taken decisive action against Sanjiv Bhasin, a market expert known for his frequent appearances on business news channels, and 11 other entities, issuing an ex-parte interim order that alleges a sophisticated stock manipulation scheme. This scheme, according to Sebi's findings, resulted in illicit profits of approximately ₹11.37 crore at the expense of unsuspecting retail investors. The order not only restrains the accused from participating in the securities market but also impounds the suspected unlawful gains, signaling a firm stance against market malpractices and a commitment to safeguarding investor interests. The core of Sebi's accusation revolves around a 'pump and dump' scheme, wherein Bhasin allegedly exploited his media visibility to promote stocks that benefited entities linked to him, rather than offering genuine investment advice. This involved accumulating shares of certain companies through entities like Venus Portfolios, Gemini Portfolios, and HB Stockholdings, which were directly or indirectly controlled by Bhasin's associates and family members. Subsequently, Bhasin would recommend these same stocks on prominent national television channels and IIFL's Telegram channel, typically presenting a bullish outlook with specific target prices. This public endorsement invariably led to a temporary surge in both the price and trading volume of the stocks. Taking advantage of this artificial inflation, the pre-positioned shares were quickly sold during the rally, often within a matter of minutes, securing substantial profits for the involved parties. This pattern, meticulously documented by Sebi across numerous trades, constitutes a clear violation of the Sebi Act and the Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) Regulations. The investigation leading to this order was initiated following three complaints received by Sebi in September and October 2023. These complaints alleged manipulative trading practices stemming from televised stock recommendations. Following preliminary assessments, Sebi appointed an investigating authority, which, in June 2024, obtained search-and-seizure warrants from a court and conducted operations at multiple premises connected to the accused. These operations yielded crucial evidence, including electronic devices, trading records, bank statements, and sworn testimonies, all of which contributed to a comprehensive understanding of the alleged scheme. The evidence gathered by Sebi paints a detailed picture of coordinated manipulation. Call data records revealed frequent communication between Bhasin and dealers at RRB Master Securities, particularly around the timing of the suspect trades. WhatsApp chats further substantiated the coordination between Bhasin, the dealers, and other intermediaries, containing discussions about trade placements in Bhasin's absence. Trade logs and order data revealed a consistent pattern of shares being purchased just before public recommendations and sold shortly thereafter. Furthermore, screenshots of order confirmations were shared with Bhasin, providing real-time updates of the trades as they occurred. Sworn statements allegedly confirmed Bhasin's direct role in directing the trades, with his cousin, Lalit Bhasin, authorizing him to operate accounts held by Venus and Gemini Portfolios. Sebi also uncovered a complex web of cross-shareholdings linking Venus, Gemini, Leo, and HB Stockholdings, all connected through family and business ties. This network facilitated the movement of funds and the concealment of beneficial ownership, adding another layer of complexity to the scheme. The trading pattern, as identified by Sebi, followed a consistent and repeatable structure. Stocks were initially accumulated in the accounts of Venus, Gemini, and HB Stockholdings through the brokerage firm RRB Master Securities. Bhasin then issued buy recommendations for these same stocks on television or Telegram. This media promotion triggered short-lived rallies in price and volume, during which the entities liquidated their stock holdings, often within minutes. Bhasin allegedly maintained close contact with the dealers executing these trades, ensuring seamless coordination. This pattern was documented across a range of stocks, including prominent names such as L&T Technology Services, Parag Milk Foods, InterGlobe Aviation (Indigo), SAIL, and Godrej Consumer Products. The Sebi order names a total of 12 noticees, categorized as 'guest expert' Sanjiv Bhasin, 'enablers' Lalit Bhasin, Ashish Kapur, and RRB Master Securities, 'dealers and insiders' Rajiv Kapoor, Jagat Singh, and Praveen Gupta, and 'profit-making entities' Venus Portfolios, Gemini Portfolios, HB Stockholdings, Leo Portfolios, and Babita Gupta (wife of Praveen Gupta). Sebi alleges that these entities operated in concert, with trades being executed based on Bhasin's instructions and profits distributed across multiple accounts to obscure the trail. As a result of its findings, Sebi has taken stringent action, restraining all 12 noticees from buying, selling, or dealing in securities, either directly or indirectly. Bank and demat accounts have been frozen to the extent of the allegedly illegal gains, amounting to ₹11.37 crore. The order also serves as a show-cause notice, requiring the accused to provide explanations as to why they should not face further penalties under the Sebi Act. The 'unlawful gains,' representing the profits allegedly derived from deceptive or manipulative practices, have been impounded to prevent their dissipation during the ongoing investigation. Sebi emphasizes that impounding these gains is crucial to protect investors and ensure the effectiveness of its investigation. The current order is a preliminary one, and the noticees have the opportunity to respond to the allegations and present their defense. Sebi will issue final directions after reviewing their replies and completing its investigation. In the interim, the accused have the right to appeal the order before the Securities Appellate Tribunal (SAT).
This case carries significant implications for investors, particularly retail investors who may be vulnerable to manipulation through coordinated, media-driven schemes. The Sebi order highlights the risks associated with blindly following stock recommendations from television or social media platforms. Lawyers have emphasized that retail investors who acted on Bhasin's tips essentially served as exit liquidity, enabling the accused to profit at their expense. Nirali Mehta, a partner at Mindspright Legal, advises investors to always verify whether an advisor is Sebi-registered, scrutinize potential conflicts of interest, and avoid acting impulsively on recommendations from televised or social media sources. The case also raises concerns about the due diligence practices of media platforms. Mehta suggests that media outlets must now enhance their monitoring of expert disclosures, maintain detailed records, and be vigilant for patterns that suggest misuse of the reach they provide. The case could also have repercussions for IIFL Securities, even though the firm has not been named as a violator by Sebi. The firm has clarified that Bhasin was not a director and held no board role. However, Sebi's findings may prompt closer scrutiny of how brokerages manage their affiliations with public commentators and could lead to stricter internal controls on compliance, communication, and conflict disclosures. The alleged scheme underscores the importance of investor education and awareness. Retail investors need to be equipped with the knowledge and tools to critically evaluate investment advice and conduct their own research before making investment decisions. This includes understanding the risks associated with specific stocks, analyzing financial statements, and being wary of overly optimistic or sensational recommendations. Furthermore, the case highlights the need for stronger regulatory oversight of media appearances by market experts. Regulators may need to implement measures to ensure that experts disclose any potential conflicts of interest and that their recommendations are based on sound analysis rather than personal gain. This could involve stricter licensing requirements, mandatory disclosure forms, and increased monitoring of media appearances. The Sebi order serves as a reminder of the ongoing challenges in maintaining market integrity and protecting investors from fraud and manipulation. It demonstrates Sebi's commitment to investigating and prosecuting those who engage in such activities. However, it also underscores the need for continuous vigilance and proactive measures to prevent future schemes from emerging. This includes strengthening regulatory frameworks, enhancing enforcement capabilities, and promoting investor education.
In conclusion, the Sebi's interim order against Sanjiv Bhasin and associated entities marks a significant step towards curbing stock market manipulation and protecting investor interests. The alleged 'pump and dump' scheme, orchestrated through media appearances and coordinated trading, highlights the vulnerability of retail investors to misleading investment advice. The investigation and subsequent actions taken by Sebi, including restraining the accused from market participation and impounding unlawful gains, send a strong message against market malpractices. This case underscores the importance of due diligence, investor awareness, and robust regulatory oversight in maintaining a fair and transparent securities market. The need for investors to be cautious and skeptical of investment recommendations from media outlets and social media platforms is crucial. Verifying advisor credentials, scrutinizing conflicts of interest, and conducting independent research are essential steps to protect oneself from potential manipulation. Media outlets also have a responsibility to ensure the integrity of their platforms by monitoring expert disclosures and being vigilant for signs of potential abuse. Furthermore, brokerages need to carefully manage their affiliations with public commentators and implement strict internal controls on compliance and communication. The ongoing investigation and potential future actions will further shape the regulatory landscape and hopefully deter similar activities in the future. The outcome of this case will have significant implications for both the accused and the broader investment community, emphasizing the need for transparency, accountability, and ethical conduct in the securities market. The steps Sebi has taken serve as a crucial warning, reinforcing the importance of informed investment decisions and the potential consequences of engaging in fraudulent and manipulative activities. This situation calls for a multi-faceted approach involving regulators, media outlets, financial institutions, and investors themselves to build a more resilient and trustworthy investment ecosystem.
Source: Mint Explainer: How Sebi uncovered Sanjiv Bhasin's alleged stock manipulation scheme