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Securities and Exchange Board of India has imposed penalties totalling INR 1.5 crore on eight entities for front-running trades linked to a portfolio management services client using non-public information. The regulator has also ordered disgorgement of unlawful gains amounting to INR 1.29 crore, along with interest, to be credited to the Investor Protection and Education Fund. The action follows findings of coordinated trading based on advance knowledge of large institutional orders. Several individuals and entities have been barred from accessing the securities market, while certain individuals have also been restricted from holding managerial positions in listed companies and registered intermediaries.
Securities and Exchange Board of India has imposed monetary penalties totalling INR 1.5 crore on eight entities for engaging in front-running of trades involving a portfolio management services client, following an investigation into misuse of non-public information. Advertisement
In its final order issued recently, the regulator also directed disgorgement of unlawful gains amounting to INR 1.29 crore, along with interest at 12 per cent per annum, to be credited to the Investor Protection and Education Fund.
The investigation found that Ashok Maheshwari had access to confidential trading information of a large client and shared details of impending orders with Darshan Bakul Shah under a profit-sharing arrangement. Based on this information, trades were executed ahead of the client’s transactions to benefit from expected price movements.
The regulator observed that trades were carried out not only in individual accounts but also through connected entities, including accounts held by family members and associated companies. The scheme extended to multiple entities, indicating a coordinated approach to exploiting advance knowledge of institutional trades.
Sebi noted that the pattern of trades, supported by digital evidence and price-time matching with the client’s orders, established a deliberate strategy to misuse privileged information. It further clarified that front-running is driven by information asymmetry and is not dependent on factors such as the liquidity of the securities traded.
The regulator also found that Mihir Dhirajalal Savla and Chirag Mahendra Shah had made false statements during the course of the investigation in an attempt to conceal misuse of accounts.
All eight entities were held to have violated provisions of the Prohibition of Fraudulent and Unfair Trade Practices regulations. Penalties imposed included INR 25 lakh each on Ashok Maheshwari and Darshan Bakul Shah, INR 20 lakh each on CHL Stock Concepts Pvt Ltd and Chirag Mahendra Shah, and INR 15 lakh each on the remaining entities. Additional penalties were imposed for furnishing false information.
Further, the entities have been barred from accessing the securities market for specified periods, taking into account restrictions already imposed under an interim order. Certain individuals, including Ashok Maheshwari, Darshan Bakul Shah and Chirag Mahendra Shah, have also been restrained from holding positions as directors or key managerial personnel in listed companies or Sebi-registered intermediaries for a period of two years.
The order, issued by Whole Time Member Amarjeet Singh, highlighted the seriousness of the violations, particularly in cases involving individuals associated with market intermediaries, noting that such conduct warranted stricter regulatory action.
Source - PTI
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