Six entities pay Rs 3.49 crore to settle front-running trade case with SEBI

New Delhi: Six entities, including Samir Kothari and Jitendra N Kewalramani, has settled with Sebi in a case pertaining to the suspected front-running of trades by paying Rs 3.49 crore towards settlement charges.

The other entities that settled the matter with the Securities and Exchange Board of India (Sebi) are Kuntal Goel, Jitendra N Kewalramani HUF, Dipika J Kewalramani and Pallavi Shailesh Nayak, Sebi said in the order on Thursday.

Apart from the settlement amount, Sebi's committee placed other conditions to settle the case.

These included disgorgement of unlawful gain totalling Rs 2.06 crore along with 12 per cent interest per annum from the date of the impugned transaction to the date of filing of the settlement application for disgorgement to be paid by Samir Kothari, Kuntal Goel and Jitendra N Kewalramani.

Also, the six entities will voluntarily debarred themselves from the securities markets for six months.

The order came after Sebi received four separate settlement applications from the applicants in March 2024, proposing to settle the instant proceedings through a settlement order "without admitting or denying the allegations".

"It is hereby ordered that the proceedings initiated against the applicants, vide show cause notice dated January 24, 2024, is disposed of," Sebi's Chief General Manager Santosh Shukla said in the settlement order.

Sebi conducted an investigation to ascertain whether there was any violation of the provisions of PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) rules by certain entities during the period from January 2021 to October 2022.

Pursuant to the investigation, a common show cause notice dated January 24, 2024, was issued to certain entities, including the applicants.

The SCN alleged that the applicants and other noticees were consistently placing orders ahead of Bharat Kanaiyalal Sheth Family Trust, Ravi Kanaiyalal Sheth Family Trust and Arjun Discretionary Trust (collectively referred to as the Big Clients) in the equity (cash) segment of NSE and were squaring off the same.

Further, Jitendra, who was the authorised person of Angel One was, directly or indirectly, in possession of the details of the impending orders to be placed by the big clients.

Accordingly, during the investigation period front running trades were allegedly executed by him in his own trading account and the trading accounts of certain entities, including the applicants (except Kuntal Goel and Samir Kothari), who were all related/associated to him during the probe period.

Sebi also alleged that Jitendra was connected to Kothari through an employer-employee relationship, while Kuntal, who possessed the information of the impending trades of the big client is connected to Samir Kothari by way of frequent calls leading to Jitendra having access to the non-public-information-of-the-impending orders of the big clients.

The rest of the notices/ applicants were, directly or indirectly, in possession of the details of the impending orders to be placed on behalf of the big clients, through Jitendra, who then placed orders in clients' accounts to generate abnormal profits.

Therefore, the regulator alleged that the noticees have contravened the PFUTP norms.

Thereafter, the applicants filed revised settlement terms which were approved by Sebi's High Powered Advisory Committee (HPAC).

Apart from remitting the disgorgement amount, individually, Jitendra N Kewalramani paid Rs 64.29 lakh, while Kuntal paid Rs 55.90 lakh, and Rs 57.20 lakh each paid by Kothari, Jitendra N Kewalramani HUF, Dipika J Kewalramani and Pallavi Shailesh Nayak.