SEBI Bans 8 Entities for Front-Running, Impounds Rs 4.8 Cr

New Delhi, Jan 27 (PTI) Regulator Sebi on Monday barred eight entities from the securities market and impounded illegal gains of Rs 4.82 crore made from their alleged front-running activities.

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 public.

The findings came after the Securities and Exchange Board of India (Sebi) conducted an investigation in respect of the alleged front-running of the trades of Gagandeep Consultancy Private Limited (big client) by certain entities.

The focus of the investigation was to ascertain the violation of provisions of the PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) rules by the entities and the period of investigation was from September 2018 to September 2023.

In its interim order, Sebi found that Ashish Kirti Kothari, his family members, and his HUF (Hindu Undivided Family) are accused of front-running trades of the big client.

During the course of the investigation, the regulator observed that the big client was placing its orders through the stock broker, Nirav Mahendra Sapani, who was working as a dealer at Anvil Share & Stock Broking Private Limited.

Sapani acted as the information carrier, passing insider information about a big client's trades to Ashish and his associates. Krishna Tukaram Kadam's accounts were used by Ashish Kirti Kothari and others to conduct front-running trades.

The unlawful gains were shared among the involved parties.

The modus operandi of the operation involved front-runners -- Ashish and his associates -- placing trades ahead of the big client's orders based on confidential information. They shared the profits with Sapani, who helped facilitate the trades, and Kadam's accounts were used to execute these trades and launder the gains.

By indulging in such trades, the entities violated several provisions of the Sebi Act.

Accordingly, the Sebi has restrained these eight entities from buying, selling or dealing in securities, either directly or indirectly, in any manner whatsoever until further orders.

Additionally, "an amount of Rs 4.82 crore being the total unlawful gains earned from the alleged front-running activities, is impounded, jointly and severally, from the Noticees".