Press Esc to close
Friday 01 August 2014
News updated at 8:47 AM IST
Weather
Max: 0°C
Min : 0°C
In Bangalore
Sunny day

Sebi to define 'front-running' soon: Sinha

Mumbai, Nov 25, 2012, (PTI) :
Securities and Exchange Board Chairman Upendra Kumar Sinha. File Photo

Market watchdog Sebi has said it will review the regulations regarding fraudulent and unfair trade practices as the present rules need to clearly define 'front-running'.

The comment follows a recent case on the issue where the tribunal, SAT, set aside a Sebi order.

"Front-running is an offence and we need to make a lot of improvement... Regulations on insider-trading are different, and we have to have a serious re-look at regulations," Securities and Exchange Board Chairman Upendra Kumar Sinha told reporters at a media workshop organised by the regulator on securities market here yesterday.


Front-running is an illegal practise where a stockbroker executes orders on a security for his/her own account, taking advantage of advance knowledge of pending orders.

Front-runners use confidential information for buying or selling securities ahead of a large order with the objective of benefiting from the subsequent price movement.

Earlier this month, the Securities Appellate Tribunal (SAT) set aside a Sebi order penalising three persons for front-running -- it was the first case involving individuals -- which raised questions about the efficacy of the law.

The Sebi had barred the trio from the market, and imposed a fine of Rs 1.13 crore on two of them. They had allegedly made a profit of Rs 1.56 crore from 557 synchronised trades on the NSE and 50 on the BSE between January 2007 and March 2009.

But setting aside the Sebi order, SAT said the existing prohibition of fraudulent and unfair trade practises (FUTP) regulations of 2003 do not clearly define "front-running", and even if a particular fraudulent transaction could be construed as front running, the regulations applied only to market intermediaries and not individuals.

Traders Kanaiyalal Baldevbhai Patel and Anandkumar Baldevbhai Patel were in the dock for executing orders on the information received from cousin Dipak Patel, who was a portfolio manager at Passport India Investment Mauritius.

Sebi alleged that Dipak Patel tipped them off about forthcoming trading activity of Passport India, and Kanaiyalal Patel traded ahead of Passport's orders, making a huge profit. Trades were executed using a phone number registered in Anandkumar Patel's name.

One of the handicaps suffered by Sebi while regulating front-running is it is not empowered to tap phones. It had sought a notification to get this power under the Telegraph Act.

The government did not accede to Sebi's request, but last week Finance Minister P Chidambaram had told PTI that government could provide Sebi with call records data on case to case basis.

Go to Top

Photo Gallery
An man holds a cycle and wades through a flooded street as it rains in Mumbai. Heavy rainfall...

An man holds a cycle and wades through a flooded street as it rains in Mumbai. Heavy rainfall...

A traditional Teej procession at Tripolia Gate in Jaipur on Thursday...

A traditional Teej procession at Tripolia Gate in Jaipur on Thursday...

Gold medal winner Vikas Shive Gowda of India throws the discus in the final at Hampden Park...

Gold medal winner Vikas Shive Gowda of India throws the discus in the final at Hampden Park...

South Africa's Rhett Halkett, right, vies for the ball with India's Chandanda Nikkin, during...

South Africa's Rhett Halkett, right, vies for the ball with India's Chandanda Nikkin, during...

Arvind Panwar makes his way towards the finish line in the Men's Time Trial during...

Arvind Panwar makes his way towards the finish line in the Men's Time Trial during...

Dipa Karmakar of India performs during the women's gymnastics vault apparatus final at the 2014...

Dipa Karmakar of India performs during the women's gymnastics vault apparatus final at the 2014...

Babita Kumari wrestles with Canada's Brittanee Laverdure during the women's Freestyle...

Babita Kumari wrestles with Canada's Brittanee Laverdure during the women's Freestyle...

People at waterlogged Shivaji Chowk, Bhiwandi after heavy rains near Mumbai on Thursday...

People at waterlogged Shivaji Chowk, Bhiwandi after heavy rains near Mumbai on Thursday...

NDRF personnel with a body of a victim of landslide at Malin village on Thursday...

NDRF personnel with a body of a victim of landslide at Malin village on Thursday...

A crack seen on the highway caused by the erosion due to heavy rains at Kasara Ghat...

A crack seen on the highway caused by the erosion due to heavy rains at Kasara Ghat...

Copyright 2014, The Printers (Mysore) Private Ltd., 75, M.G Road, Post Box 5331, Bangalore - 560001
Tel: +91 (80) 25880000 Fax No. +91 (80) 25880523