Sebi Bans 7 Entities for Front-Running, Rs 35 Lakh Disgorged

New Delhi, Jan 31 (PTI) Sebi on Wednesday barred seven entities from the securities market for up to three years and directed to disgorge 'unlawful profit' of Rs 35 lakh made by them in a case of front-running the trades of Sanctum Wealth Management (now known as Sanctum Wealth).

Front-running refers to an illegal practice in the stock market where an entity trades based on advanced information from a broker or analyst before the information has been made available to its clients.

In its order, Sebi has prohibited Kishan Vishram Nanda from the securities market for three years and six entities related to him for one year. Additionally, the regulator imposed a fine of Rs 5 lakh on Nanda.

Besides, these seven entities have been directed to disgorge a sum of Rs 34,84,605 along with an interest of 12 per cent per annum.

The present matter came out from an alert generated by Sebi's surveillance system indicating the suspected front-running of trades of Sanctum Wealth by certain connected entities.

After this, the regulator carried out an investigation into the matter to verify the veracity of the information brought out in the alert and ascertain whether there had been any violation of the provisions of the Sebi Act. The investigation considered the period -- January 1, 2018 to April 2, 2021.

In its probe, Sebi found that Nanda worked as an equity dealer in the broking arm of Sanctum for the big client, which was the PMS arm of Sanctum -- Sanctum PMS. Owing to this position, he was privy to information regarding the impending trade orders of the big client, information that was not publicly available.

Nanda was the information carrier as he was in possession of non-public information regarding impending trade orders of Sanctum PMS and the main front runner who traded through his HUF account -- Kishan Vishram Nanda HUF -- and through his proxy trading accounts in the names of his six family members, Sebi noted.

The accounts of these family members were used as mule accounts to front-run the impending trade orders of the big client, it added.

Apart from Nanda, the other six entities that have been restrained from the securities market are Kishan Vishram Nanda HUF, Sumitra Vishram Nanda, Prafulla Kisan Nanda, Vijay Vishram Nanda HUF, Rahul Narottam Nanda, and Leena Vijay Nanda.