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This article is more than 1 year old.

Sebi bans 16 entities for front-running activities

Mini

Regulator Sebi on Friday barred 16 entities from the capital markets for up to seven years for indulging in front-running activities. The entities have been prohibited from the capital markets for a period ranging from five to seven years.

Sebi bans 16 entities for front-running activities
Regulator Sebi on Friday barred 16 entities from the capital markets for up to seven years for indulging in front-running activities. The entities have been prohibited from the capital markets for a period ranging from five to seven years.
Of the 16 entities, six have been asked to disgorge illegal gains of nearly Rs 20 crore. Front-running refers to an illegal practice in stock market where an entity trades on the basis of advance information from a broker or analyst before the information has been made available to their clients.
The order follows a Sebi probe into suspected front-running by certain entities between March 2009 to March 2011. The investigation revealed Manish Chaturvedi, who was employed with Sterling Group from November 2008 to November 2011, was not only involved in suggesting scrips for investments by that group but also used to place orders for Sterling.
He had utilised the information pertaining to the impending trades of Sterling Group to his benefit by devising a fraudulent scheme with the aid of his friend, Praveen Jain, who admittedly arranged for trading accounts of several entities to be used by Chaturvedi. These entities allowed their trading accounts to be used as per the advice by Chaturvedi in lieu of commission, lesser brokerages, from the profits accruing through the front-running activity.
Besides trading in the accounts so arranged, Chaturvedi also utilised the account of his mother, Laxmi Chaturvedi, to place orders to front-run the impending orders of the Sterling Group. Madhu Chanda, who was a long standing employee and dealer of Sharekhan, had facilitated the front-running activity of Manish Chaturvedi.
Both were observed to be frequently communicating during market hours and the orders placed in the trading accounts of some of the entities were also in synchronisation with the call timings between them, Sebi noted. Further,Madhu Chanda had used/passed the information of orders placed byManish Chaturvedi to her husbandAnandilal Chanda.
"Anandilal Chanda with the strength of such 'information' passed on by Madhu Chanda, used the accounts of Anandilal Chanda HUF and his own account to front-run the clients of Sharekhan," Sebi in its 74-page order. Further, by entering into such trades in a fraudulent manner, the entities had defrauded investors in the securities market and had obtained profits for themselves, it added. such activities, they violated provisions of PFUTP (Prohibition of Fraudulent and Unfair Trade Practices), Sebi said.
Accordingly, Sebi has barred Manish Chaturvedi from the capital markets for seven years, while Madhu Chanda, Anandilal Chanda, Anandilal Chanda HUF and Jain have been barred for six years. The remaining entities, including Manish Chaturvedi's father Manohar Chaturvedi, have been barred for five years. Also, the regulator has asked Manish Chaturvedi and his parents to jointly and severally disgorge Rs 18.98 crore. In addition, Madhu Chanda, Anandilal Chanda and Anandilal Chanda HUF have been ordered to jointly and severally disgorge Rs 91.27 lakh. They have been asked to disgorge the amount within 45 days. In case of failure to do so, interest at the rate of 12 per annum will be applicable from the expiry of the 45 days till the date of actual payment, it added.
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