Yoga guru Baba Ramdev may be treading on thin ice as the capital markets regulator the Securities and Exchange Board of India (SEBI) has a history of acting against companies and their officials for making statements -- even those made in passing or just like a side note -- that are not in compliance with the regulatory framework.
Legal experts say that SEBI has powers to impose monetary penalties on entities for giving statements that violate the regulatory framework or can even issue a warning or a 'cease and desist' order against any company official or functionary.
In a video that has gone viral, the Patanjali founder is seen telling his followers to invest in the shares of Ruchi Soya, which the Haridwar-based company acquired in 2019. He is further heard telling the attendees of the yoga session to open a demat account and that investing in Ruchi Soya would give guaranteed returns.
This assumes significance as equity investments come with an inherent risk and even SEBI regulations bar entities from promising assured returns to investors. Also, any person who wants to give stock advice has to register with SEBI as an investment advisor.
While reports suggest that SEBI has already taken note of the video and sought an explanation on the same, the timing of Baba's statements have made the issue a serious one as a follow-on public offering (FPO) of Ruchi Soya is in the offing.
Meanwhile, an email query has been sent to the media team of Baba Ramdev.
Interestingly, there have been instances in the past where company officials have been caught on the wrong foot for making casual remarks even as the regulatory framework has clearly laid down that any material disclosure has to be first made on the stock exchange platform so there is no information asymmetry.
In December 2017, SEBI imposed a monetary penalty of Rs 8 lakh on Emami Chairman RS Agarwal for his alleged remarks to a Times of India journalist that he is interested in acquiring Amrutanjan Healthcare.
SEBI issued a show-cause notice to Agarwal who clarified that he only expressed his desire for acquisition in the pharmaceutical or FMCG space. While Agarwal filed an appeal at the Securities Appellate Tribunal (SAT), which set aside the SEBI order, there is a precedence of the market regulator acting against individuals making such remarks.
"SEBI in the past has imposed monetary penalties. In a case, SEBI has also passed a warning and cease and desist order against a functionary," said Sumit Agrawal, Founder, Regstreet Law Advisors and a former SEBI law officer, while adding that recently two similar matters concluded by way of a settlement order.
"Therefore, for SEBI probing such statements for its motive and their impact is an ordinary course of regulatory function. However, for the charge of securities fraud, the threshold of evidence needed is very high. Recently, SAT had set aside SEBI order where Emami chairman reportedly told a journalist that he is interested in acquiring Amrutanjan Helathcare and SEBI imposed a penalty. Each case is different though," added Agrarwal.
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