SEBI imposes Rs 40 lakh penalty on four entities in Axis MF front-running case

However, the regulator has disposed of adjudication proceedings against the remaining six noticees without imposing any monetary penalty. The investigation was initiated after alerts generated by SEBI's surveillance system indicated possible front-running of trades executed by Axis Mutual Fund, which was identified as the 'Big Client'. According to the investigation findings, Viresh Joshi, then chief dealer at Axis Mutual Fund, was allegedly the information provider.

The investigation identified nine suspected front-running entities and examined the role of several intermediaries, including arrangers and brokers. The allegations against Woodstock Broking and Marfatia Stock Broking included facilitating the execution of front-running trades by providing access to trading terminals and operational support for running these terminals from outside India. The regulator alleged that the two brokerage firms and their directors had violated provisions of the SEBI Act and the Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) Regulations.

On the role of Suresh Kanmal Jajoo, director of Woodstock Broking, SEBI adjudicating officer Jai Sebastian wrote in the order: “The material on record did not indicate mere holding of a directorship in a formal sense. On the contrary, the material demonstrated his active, conscious and integral role in the arrangement through which the trading account of Visa Capital Partners and the terminal infrastructure of Noticee No. 1 were made available for use in the impugned trading activity.”

Woodstock Broking has been named as Noticee No. 1 in the SEBI order. On the role of Marfatia Stock Broking and its director Nishil Marfatia, the adjudication order said: “I find that the case of Noticee No. 8 was not one of mere directorship. The material showed active nexus with the facilitation of terminal access and sufficient control over the affairs of Noticee No. 7 to attract the ingredients of Section 27.”

Marfatia Stock Broking has been named as Noticee No. 7, while its director Nishil Marfatia is Noticee No. 8 in the adjudication order. The investigation also identified Prijesh Kurani, based in Dubai, as an order and trade executor, while Sumit Desai, Pranav Vora and Vaibhav Pandya were identified as arrangers. The adjudication proceedings against the other six noticees were closed without imposing any penalties.