Sebi unhappy with Baba Ramdev’s viral sermon

The Securities and Exchange Board of India (Sebi) asked Ruchi Soya to explain why the yoga guru violated regulatory standards, said two people with direct knowledge of the matter, seeking anonymity.

“Sebi’s letter requesting an explanation, sent on September 28, concerns an alleged violation of standards for insider trading, fraud prevention, unfair trading practices and regulation of investment advisers,” said one. of both people.

“A notice was sent to Ruchi Soya’s follow-up public offering (OPF) bankers and the compliance team, requesting clarification on Ramdev’s statements. The bankers and the compliance team duly responded to it, ”said the second person.

Email queries sent to Ramdev’s media team and Sebi went unanswered.

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Patanjali acquired Ruchi Soya in 2019 as part of the insolvency proceedings

The capital markets regulator sent the letter after a music video of Ramdev urging thousands of his supporters to invest in Ruchi Soya stock during a yoga session broadcast on Aastha TV went viral. Patanjali acquired Ruchi Soya in 2019 as part of the insolvency proceedings.

“Today there is a lot of buzz about the Ruchi Soya FPO. Now do you want to become a crorepati? I will give you the mantra to become a crorepati. I just learned the mechanics of investing in the stock market. To trade stocks, you need a Demat account. So open a Demat account today, ”Ramdev was heard in the music video. So far, this appears to be an attempt to educate his supporters on investing. But the call soon moves into troubled territory.

“Get a demat account when I tell you and buy Ruchi Soya shares. After Ruchi Soya, buy Patanjali (Ayurved) shares, ”he added. Although Patanjali is not a listed entity, the company has announced its intention to go public.

“For Patanjali, I will do more. I need to speak within limits. In the capital markets, there is a term called market capitalization. Patanjali brand equity, I have to limit my speech here. Ruchi Soya’s FPO is ongoing. You never know someone can get me stuck in legal matters; that is why I deliberately say Patanjali. The world is smart. Have Patanjali valued by any agency, and the market cap will be several thousand crore. Thus, anyone who invests in shares of Patanjali and Ruchi Soya cannot be prevented from becoming a crorepati. I give you this guarantee in the morning. But don’t buy or sell; it is a bet. Buy stocks, sit well and take Samadhi (meditation), ”Ramdev said in the video.

Although Ramdev does not own any personal stake in Ruchi Soya or Patanjali, he is the face of these two rapidly evolving consumer goods brands. He is also a non-executive director of Ruchi Soya, making him legally an insider.

So when Ramdev asks his followers to buy when he gives the signal, he is conveying and declaring his intention to pass on inside information even in the future. This is a violation of standards designed to prevent insider trading.

In the securities markets, there are no guarantees. Thus, anyone who offers guarantees is again in violation of the Sebi standards applicable to listed companies and other intermediaries.

Thus, Ramdev’s guarantee to his supporters that anyone who invests in Ruchi Soya shares will become a crorepati is a serious violation of regulatory standards.

It may also be referred to as unsolicited investment advice from a person who is not registered as an investment adviser.

“Sebi has a duty to investigate such statements to determine the motive, whether a statement that has been made is true or false is irrelevant if a statement was made in a reckless and reckless manner. Sebi is also investigating the timing, reason and transactions of those associated with the company at the time of these reports. Such cases are investigated as a fraudulent and unfair trade practice because the statement of officials can have an impact on the prices of the securities, ”said Sumit Agrawal, founder of Regstreet Law Advisors and former officer of Sebi.

It’s not that Ramdev isn’t aware that this is legally troubling. He says so in his speech. So even the argument of being new to the stock market, an unintentional mistake, may not hold much.

This is not Ruchi Soya’s first contact with the market regulator. Charges of manipulation of Ruchi Soya’s shares surfaced after its re-listing on January 27, 2020 after its resolution of bankruptcy. Stocks that started trading at ??16.5 had climbed to ??1,519 by June 26, 2020, a whopping 8,764% increase in just five months.

The regulator had to fine-tune the rules and ensure that a stock released on the stock market after a bankruptcy resolution requires a public float of at least 5%. Previously, the requirement was 1% public ownership and increased to 10% within 18 months of re-listing.

In accordance with the rules of yesteryear, Ruchi Soya is currently selling shares to increase the free float to 10%. This follow-up public offer is likely to recover the company ??4,300 crores.

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