Front running case: Sebi bans two persons from securities market for 6 months

New Delhi: Markets regulator Sebi on Tuesday restrained two persons from the securities market for six months and directed them to disgorge Rs 34.26 lakh "wrongful gains" made by them through their involvement in front-running activities.

Additionally, the regulator has imposed a penalty of Rs 5 lakh each on the two persons -- Mandar Ulhas Bhatkar and Vikrant Bhimrao Kadam.

Front-running refers to an illegal practice in the stock market where an entity trades based on advanced information from a broker or analyst before the information has been made available to its clients.

The findings came after the Securities and Exchange Board of India (Sebi) conducted an investigation into the trading activities of Bhatkar and certain other entities related to him, during the period November 2020 to September 2021.

The investigation was carried out in order to ascertain as to whether there was any possible violation of the provisions of the PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) rules.

In its investigation, Sebi found suspected front running of trades of SVI Consolidated Pvt. Ltd. (Big Client) in the cash market and equity derivatives segments of NSE by its dealer Kadam (Notice No.2) in the trading account of Bhatkar (Noticee No.1)  based on the impending order of the Big Client during the period of investigation.

"It has already been brought out that the fraudulent and unfair trade practice in this case is the front running carried out by Noticee No.2, through the account of Noticee No.1...," Sebi said in its order.

Accordingly, Sebi has restrained the persons from "accessing the securities market and further prohibited from buying, selling or otherwise dealing in securities (including units of mutual funds), directly or indirectly, or being associated with the securities market in any manner, whatsoever, for a period of six months".

The two persons have been "directed to disgorge, jointly and severally, a sum of Rs 34.26 lakh within 45 days... and the same shall be credited into the Investor Protection and Education Fund".