<p>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'.<br /><br /></p>.<p>The comment follows a recent case on the issue where the tribunal, SAT, set aside a Sebi order.<br /><br />"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.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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. <br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.</p>
<p>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'.<br /><br /></p>.<p>The comment follows a recent case on the issue where the tribunal, SAT, set aside a Sebi order.<br /><br />"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.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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. <br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.</p>