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SEBI issues interim order against Chief Dealer of IDBI Capital Markets & Securities Ltd. in a front running matter

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SEBI yesterday has issued an interim order in the matter of Front Running by one KS, who is sister of Chief Dealer (CD) of IDBI Capital Markets & Securities Ltd. instructing the noticees to disgorge INR 1.68 crore (jointly and severally) and restraining CD from associating himself with any intermediary registered with SEBI till further order.

In the present matter, SEBI has held that during the investigation period of January 01, 2019 to April 10, 2021 CD transferred funds to the account of KS and then utilized non-public prior information in his possession about the impending large orders to be placed by big clients of IDBI Capital Markets & Securities Ltd. for his and his sister’s financial gain by executing trades prior to placement of such impending orders. Subsequently, they would reverse their position around the time of placement of aforementioned large orders resulting in profit. SEBI has also observed that all such trades were executed by CD himself, on behalf of his sister, during the trading hours from his own office as was found from the IP Address used to access the trading portal of KS. According to SEBI, some of the scrips that were front-run were Gujarat Narmada Valley Fertilizers and Chemicals Limited, Reliance Infrastructure, Britannia Industries Limited, Zee Entertainment Enterprises Limited, Castrol, Linde@India, Ambuja Cements Limited, Hindustan Zinc, Adani Enterprises Limited, ICICI Lombard General Insurance Company Limited, Aditya Birla Sun Life AMC and Voltas Limited – A TATA Enterprise.

Sometimes the stories are simple, and sometimes they are hard, complex and one-sided. SEBI has in the last one year issued orders in several significant front running matters including in the matter of DHFL Pramerica Trustees Private Ltd, Reliance Capital Asset Mgt Limited-Mutual Funds, Quest Investment Advisors Pvt Ltd, Religare Finvest Limited (SME Loans), IIFL (India Infoline Group), Fidelity Investments Group among others. Many of them are in litigation and few stayed by the Securities Appellate Tribunal (for eg. talk-of-the-town Hemant Ghai order sent back for re-examination).

Interestingly, this latest ad-interim order-cum-show cause notice has been issued for transactions starting from January, 2019 and when the investigation was undergoing. For unintended consequences of such orders, one may see the following opinion piece on “An interim order must not be open-ended” at https://lnkd.in/dqsMfbTJ

The interim order of SEBI WTM has been attached below for the readers.

Readers can reach out to Regstreet Law Advisors team at info@regstreetlaw.com. Any feedback / comment is most welcome.

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