logo-sebi-indianstockmarketguideThe Indian stock markets regulator Securities & Exchange Board of India (SEBI), on the 18th of November, issued a cease and desist order against Dr. Nalamothu Venkata Krishna, who ran the blog StockMarketGuide.in. Krishna was soliciting significant insider information related to stake sale, mergers, acquisitions, offering compensation of up to Rs. 5 lakh for information on specific companies. SEBI has barred Krishna from soliciting insider information on his blog, communicating, recommending or counselling on the basis of insider information. (via BusinessLine)

Krishna has 15 days to seek a hearing with SEBI on the matter. However, the StockMarketGuide.in website – rather a blog hosted on Blogger – is now defunct. We’ve saved a screenshot of the post soliciting insider information here (1.21MB, JPG file).

Krishna was offering for insider information, with a maximum investment duration of 1 month:

1. Rs 10,000: Ideas or inside news which will give just 10-20% returns.
2. Rs 25,000: Investment ideas which will give 20-30% returns.
3. Rs 40,000: Inside news or investment opportunities which will help my subscribers to get 30-50% returns.
4. Rs 60,000: If any one sends me inside news or investment idea which will help my subscribers to make 50-70% returns.
5. Rs 1 lakh: If your investment idea or inside news will help my subscribers to make more than 70% returns.

Additionally, he posted that: “I will even pay you Rs 5 lakh if you provide me 100% sure inside news about a major company.”

A Regulatory Problem

I wonder if this is a case of naivety – in which case the ignorance of the law is no excuse – or just the perception that regulators aren’t concerned about whats happening on the Interwebs. But I would be surprised if this is the only such case: message boards and social networks are full of stock market tips – StockMarketGuide was an open forum, but I wouldn’t be surprised if there are members only groups as well where market sensitive information does get disclosed. The issue here is of tracking and monitoring, and while newspapers and television are mediums with moderated and limited publishers, and can be monitored, the Internet is a free-for-all.

In that case, the only way a regulator can learn about such a situation is if there is a whistle-blower.

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According to the SEBI Order,

  1. Now, therefore, in exercise of the powers conferred under Section 11D read with Section 19 of SEBI Act, 1992, I hereby, by way of ex-parte order, direct Dr. Nalamothu Venkata Krishna, to cease and desist from the following acts:
    1. Issuing or continuing to issue online offer soliciting unpublished price sensitive information from the insiders in violation of SEBI (Prohibition of Insider Trading) Regulations, 1992.
    2. Communicating directly or indirectly, any inside information received.
    3. Trading directly or indirectly on the basis of inside information received.
    4. Recommending or counseling trading in scrips for which inside information is received.
  2. All investors are also cautioned not to avail of the online offers made by Dr. Krishna in this regard, or any similar proposals contained in advertisements, in print or electronic media.
  3. The order shall come into force with immediate effect. However, it is open to Dr. Krishna to file objections, if any, to this order within fifteen days and avail an opportunity of personal hearing at the Securities Exchange Board of India, Head Office, SEBI Bhavan, Plot No. C4-A, ‘G’ Block, Bandra-Kurla Complex, Bandra (East), Mumbai-400 051 on a date and time to be fixed at his request in this regard.