HDFC MF front-running case: Sebi levies Rs 85 lakh fine on 7 entities

By: |
New Delhi | November 29, 2019 5:51 PM

Front-running refers to an unethical practice by someone trading in shares on the basis of advance information given by a broker, analyst or other executive at a market intermediary before the trades are conducted by that entity.

sebi, sebi fine, HDFC mutual funds, hdfc MF case, HDFC MF front-running caseSebi in an order said the “trading pattern of the noticees that by indulging into front running the noticees had disturbed the market equilibrium and normal price discovery mechanism of stock exchanges.”

Markets regulator Sebi on Friday imposed a total fine of Rs 85 lakh on seven entities for flouting regulatory norms in the front-running of HDFC Mutual fund. Front-running refers to an unethical practice by someone trading in shares on the basis of advance information given by a broker, analyst or other executive at a market intermediary before the trades are conducted by that entity. Sebi in an order said the “trading pattern of the noticees that by indulging into front running the noticees had disturbed the market equilibrium and normal price discovery mechanism of stock exchanges, besides creating false or misleading appearance of the trading in the securities market”.

The order follows an investigation carried out by Sebi into the matter of front-running by certain entities between June 2000 and June 2010. The probe found that the entites made illegal gains by way of front-running. According to the latest Sebi order, Rajiv Sanghvi made illegal gains to the tune of Rs 27,09,298, Rajiv Sanghvi-HUF (Rs 9,72,691), Sanjay Sanghvi (Rs 39,85,851), Sonal Sanghvi (Rs 20,03,481), Dipti Mehta (Rs 8,31,096) and Kalpana Kapadia (Rs 47,24,293).

Accordingly, the regulator in July 2018 had directed these to disgorge illegal gains made in the HDFC Mutual Fund front-running case along with the simple interest of 12 per cent per annum. In its latest order passed on Thursday, Sebi noted that the entities have disgorged the ill-gotten profits made by them along with interest in compliance with disgorgement orders.

However, Sebi imposed monetary penalty “which acts as a deterrent to the noticees and to others against indulging in such fraudulent, deceptive and manipulative practice, which erodes the trust and confidence of investors in the securities market.” Therefore, Sebi imposed a fine of Rs 10 lakh each on the entities. Additionally, it also levied a fine of Rs 25 lakh on Nilesh Kapadia for misusing his position in the capacity of dealer of HDFC AMC.

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1Asian stocks gain on stronger Chinese factory data
2Gold prices rise today after crashing over Rs 2,800 per 10 gram in Nov; silver rates jump over 1%
3Burger King IPO opens tomorrow: Should you buy this Whopper? Check bid price, lot size, details