SEBI Bars 13 Individuals, HUFs Up To Three Years For Front-Running Trades
SEBI found that orders were placed ahead of the Big Client’s transactions by certain entities connected to the proprietor of NJK Securities, an authorised person and sub-broker of Angel One.
The Securities and Exchange Board of India has barred 13 individuals and Hindu Undivided Families from the stock market for periods ranging from one to three years in a case of alleged front running involving 30 noticees.
The proceedings began with a common show cause notice dated Jan. 24, 2024, issued to all 30 noticees for allegedly front running trades placed on behalf of three entities. These were the Bharat Kanaiyalal Sheth Family Trust, Ravi Kanaiyalal Sheth Family Trust, and Arjun Discretionary Trust, collectively referred to as the “Big Client.” The investigation covered the period between Jan. 1, 2021, and Oct. 31, 2022, in the equity segment of the NSE.
SEBI found that orders were placed ahead of the Big Client’s transactions by certain entities connected to the proprietor of NJK Securities, an authorised person and sub-broker of Angel One Limited. The trades allegedly generated total unlawful gains of Rs 2.06 crore.
One of the accused was found to have passed on information about impending orders of the Big Client to NJK Securities through an employee. The regulator noted that trading patterns of the accused followed the typical front running sequence, with positions being taken before the Big Client’s orders and squared off soon after, resulting in abnormal profits.
A settlement order dated Dec 19, 2024, disposed of proceedings against six noticees — Nos. 1, 2, 3, 4, 5, and 25 — without admission or denial of guilt. However, SEBI continued proceedings against the remaining 24.
SEBI noted that several noticees were added to the case as Kartas of their respective HUFs. It also found that trades were routed through accounts opened by NJK Securities. In many cases, there was frequent communication between all the noticees and NJK.
The regulator’s order also highlighted that Angel One had failed to maintain proper records of trade execution through its authorised person, as mandated under SEBI circulars. Angel One’s show cause notice, issued separately on April 24, 2024, alleged non-maintenance of pre-order placement records and failure to comply with circulars dated March 22, 2018, and Nov. 6, 2009. This case was settled for about Rs 21 lakh.
SEBI rejected objections by some noticees who argued that the proceedings were delayed, noting that the three-year gap between the investigation period and issuance of the show cause notice did not invalidate the case.
After reviewing submissions and hearing the parties, SEBI restrained the following noticees from accessing the securities market for their respective periods:
Shankar Tukaram Vadatkar (three years), Sakshi Shankar Vadatkar (two years), Chaitali Shah (two years), Shah Swapnil Uday HUF (two years), Dipesh Mehta HUF (two years), Piyush Mehta HUF (two years), Hansraj Randhir Shah HUF (two years), Randhir Virji Shah HUF (One year), Pinakin Hansraj Shah HUF (One year), Punaiben Hansraj Shah (One year), Raahul Hansraj Shah HUF (Two years), Ankesh Mahendra Jain HUF (One year), and Dr. Kumaraswami R. Dussa HUF (One year).
They have been directed to close out any open derivative positions within three months or by contract expiry, whichever is earlier. Their assets, including shares and mutual funds, cannot be sold except for payment of penalties. Banks have also been directed to allow debits from their accounts solely for penalty payments.
