Four Entities Pay Rs 1.76 Crore To Settle Alleged Front-Running Case With SEBI

Four entities have settled with capital markets regulator Securities and Exchange Board of India in a case involving alleged front-running of trades, after collectively paying Rs 1.76 crore in settlement charges.

Front-running is an illegal market practice where an individual or entity trades based on advance information, typically obtained from a broker or analyst, before that information is made available to clients.

In an order issued on Monday, SEBI's Whole-Time Members Ananth Narayan G and Kamlesh C Varshey stated: "...it is hereby ordered that any proceedings that may be initiated for the violations are settled in respect of the applicants (Manish, Ashish, Rajni, and Indus Strategy Financial Advisors)."

The four entities, namely Manish Chaturvedi, Ashish Chaturvedi, Rajni Chaturvedi and Indus Strategy Financial Advisors Pvt. Ltd. will voluntarily undertake a six-month debarment from the securities market from the date of the settlement order.

Apart from the settlement amount, Rajni Chaturvedi paid Rs 3.85 lakh, while Manish Chaturvedi paid Rs 15.65 lakh on a joint and several liability basis.

The order came after four entities, part of the Chaturvedi group, filed suo motu settlement applications with the Securities and Exchange Board of India, proposing to settle the matter without "admitting or denying the findings of fact or conclusions of law."

The settlement applications were filed in connection with alleged violations of the PFUTP (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) rules, which prohibit deceptive and manipulative trading activities in the securities market.

SEBI had conducted an investigation to ascertain whether any front-running activities were carried out by the applicants in respect of the impending trades of the Societe Generale (Big Client) for the period from January 1, 2022, to December 8, 2023.

SEBI observed that trades were executed through Antique Stock Broking, where one of its sales traders, Atul Gopeshwar Chaturvedi, allegedly passed on material non-public information related to the impending trades of the big client to his relatives — Manish, Ashish, and Rajni — who used the data to profit in advance of the trades.

The investigation found that 14 instances of front-running occurred in the trading account of Rajni Chaturvedi, resulting in wrongful gains of Rs 2.85 lakh.

The regulator said that Indus Strategy Financial Advisors Pvt Ltd, in which Manish and Ashish Chaturvedi are directors, was found to have engaged in 26 such instances, yielding gains of Rs 11.95 lakh.

Pursuant to the receipt of the applications, the entities filed revised settlement terms in March this year, which were approved by SEBI.

The settlement as well as disgorgement amount was subsequently paid by the entities and confirmed by the regulator.

Last month, Mumbai-based Antique Stock Broking settled with SEBI a case related to the alleged front-running of trades of a large client after paying Rs 22.44 lakh towards settlement charges.

(With inputs from PTI).