SEBI has asked these 15 persons or entities to provide, within seven days of this order, a full inventory of all their assets and properties and details of all their bank accounts, demat accounts and holdings of shares or securities
Market regulator Securities and Exchange Board of India (SEBI) has ordered impounding of Rs14.70 crore as unlawful gains from 16 entities, including domestic retail brokerage Sharekhan Ltd for front-running activities. Just few days back, BNP Paribas SA announced that it is buying 100% stake in Sharekhan for an undisclosed sum.
In a 42-page order, Prashant Saran, Whole Time Member of SEBI, directed to "Impound unlawful gains of Rs13.54 crore (alleged gain of Rs8.42 crore + interest of Rs5.12 crore) jointly and severally from Manish Chaturvedi, Laxmi Chaturvedi, Manohar Chaturvedi, Viraj Mercantile Pvt Ltd, Josh Trading Pvt Ltd, Abhinandan Ranka, Pinky Auto Finance Ltd, E Ally Consulting India Pvt Ltd, Sandeep Maloo, Shree Jaisal Electronics and Industries Ltd, Neeta Maloo and Bhavesh Gadhavi.
“Impound unlawful gains of Rs65.15 lakh (alleged gain of Rs40.3 lakh + interest of Rs24.87 lakh) from Madhu Chanda, Anandilal Chanda and Anandilal Chanda HUF. From Sharekhan, the SEBI directed to impound unlawful gains of Rs50.93 lakh (alleged gain of Rs30.83 lakh + interest of Rs20.10 lakh), " the order says.
Front running refers to a market activity wherein the broker buys or sells shares or takes a similar position in the stocks ahead of large orders given by his institutional clients.
According to SEBI, the alleged gains were made between March 2009 and March 2011, and it levied an interest of 12% per annum from the date on which such profits were earned.
The SEBI order says, "Considering that the front-runners and the entities involved in the case are connected to each other directly or indirectly and collaborated with each other in engaging in the unfair practice of front-running and thereby deriving undue profits through their trades, it is pertinent to make these 12 persons or entities jointly and severally, liable for deriving undue profits from such alleged fraudulent and unfair conduct and trades. As discussed above, Madhu Chanda has used/passed information of the orders placed by clients of Sharekhan. The two dealers (Madhu and Anandilal) of Sharekhan are husband and wife and therefore the unfair gains made by them, by collaborating with each other, in the accounts of Anandilal and Chanda HUF by front-running the clients of Sharekhan also needs to be impounded jointly and severally from Madhu, Anandilal and Chanda HUF. Further, Sharekhan Ltd is also liable for the undue gains made in its Proprietary Account through trades carried out through dealer, Anandilal."
In addition, Sharekhan is asked to deposit Rs50.94 lakh in an escrow account within seven days.
SEBI has asked these 15 persons or entities to provide, within seven days of this order, a full inventory of all their assets and properties and details of all their bank accounts, demat accounts and holdings of shares or securities, if held in physical form and details of companies in which they hold substantial or controlling interest.
According to SEBI release, Sharekhan and other front running entities used orders from the Sterling Group from South India for their operations. Sterling Group consists Abhi Ambi Financial Services Ltd (Abhi Ambi), Sterling Futures & Holidays Ltd (Sterling Futures), Ratha Infrastructure Pvt Ltd (Ratha), Baghmar Finlease Ltd (Baghmar), Shanmuga Home Makers Pvt Ltd, Siva Trade Consultancy Pvt Ltd, Saravana Enterprises (Saravana), Shanmuga Real Estate & Promoters Pvt Ltd, VS Net Ltd and Siva Projects Engineering & Enterprises Ltd.