Regulations
SEBI to define 'front-running' soon: Sinha

Front-runners use confidential information for buying or selling securities ahead of a large order with the objective of benefiting from the subsequent price movement

 
Mumbai: Market watchdog Securities and Exchange Board of India (SEBI) has said it will review the regulations regarding fraudulent and unfair trade practices as the present rules need to clearly define 'front-running', reports PTI.
 
The comment follows a recent case on the issue where the Securities Appellate Tribunal (SAT), set aside a SEBI order.
 
"Front-running is an offence and we need to make a lot of improvement... Regulations on insider-trading are different, and we have to have a serious re-look at regulations," Upendra Kumar Sinha, chairman of SEBI told reporters at a media workshop organised by the regulator on securities market here Saturday.
 
Front-running is an illegal practise where a stockbroker executes orders on a security for his/her own account, taking advantage of advance knowledge of pending orders.
 
Front-runners use confidential information for buying or selling securities ahead of a large order with the objective of benefiting from the subsequent price movement.
 
Earlier this month, the SAT set aside a SEBI order penalising three persons for front-running -- it was the first case involving individuals -- which raised questions about the efficacy of the law.
 
The SEBI had barred the trio from the market, and imposed a fine of Rs1.13 crore on two of them. They had allegedly made a profit of Rs1.56 crore from 557 synchronised trades on the NSE and 50 on the BSE between January 2007 and March 2009.
 
But setting aside the SEBI order, SAT said the existing prohibition of fraudulent and unfair trade practises (FUTP) regulations of 2003 do not clearly define "front-running", and even if a particular fraudulent transaction could be construed as front running, the regulations applied only to market intermediaries and not individuals.
 
Traders Kanaiyalal Baldevbhai Patel and Anandkumar Baldevbhai Patel were in the dock for executing orders on the information received from cousin Dipak Patel, who was a portfolio manager at Passport India Investment Mauritius.
 
SEBI alleged that Dipak Patel tipped them off about forthcoming trading activity of Passport India, and Kanaiyalal Patel traded ahead of Passport's orders, making a huge profit.
 
Trades were executed using a phone number registered in Anandkumar Patel's name.
 
One of the handicaps suffered by SEBI while regulating front-running is it is not empowered to tap phones. It had sought a notification to get this power under the Telegraph Act.
 
The government did not accede to SEBI's request, but last week Finance Minister P Chidambaram had told PTI that government could provide SEBI with call records data on case to case basis.
 

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India to approach Swiss authorities in Hasan Ali Khan case

According to official sources, a team of three-four sleuths wants to place documents related to "criminal proceeds of crime" allegedly amassed by Khan in front of the Swiss authorities so that they allow them to obtain his bank accounts data and cash statements

 
New Delhi: The Union Government has asked the Indian Mission in Berne to get in touch with banking authorities of Switzerland for obtaining details of businessman Hasan Ali Khan's Swiss bank accounts in connection with the probe into one of the biggest tax evasion scams in the country, reports PTI.
 
The Finance Ministry has written to the External Affairs Ministry to approach the Swiss banking authorities to allow a team of investigators drawn from the Enforcement Directorate (ED) and the Income Tax department who will place a "comprehensive money laundering and criminal tax evasion" report on the Pune-based stud farm owner and his associates.
 
According to official sources, a team of three-four sleuths wants to place documents related to "criminal proceeds of crime" allegedly amassed by Khan in front of the Swiss authorities so that they allow them to obtain his bank accounts data and cash statements, including one which he reportedly holds in a bank in Liechtenstein.
 
Khan is currently in jail after the ED slapped a money laundering case against him last year. This case has emerged as the biggest individual case of blackmoney stashed abroad.
 
The Finance Ministry, on the ED's plea, has sought to invoke the latest provisions of the revised Double Taxation Avoidance Agreement (DTAA) between the two countries which enables India to "get information even if it only has limited details regarding the person having bank accounts in Switzerland".
 
While the I-T department has raised a tax arrear demand of Rs50,345.73 crore on Khan, the ED has registered a case under the Prevention of Money Laundering Act (PMLA). It is also probing him for alleged forex violations.
 
An alleged violation by Khan under the Passport Act is also being probed by the central agencies.
 

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SEBI extends bid deadline for verification job in Sahara case

SEBI has now decided to extend the deadline for bid submission to 21st December and would open the technical bids on the same day

 
New Delhi: Market watchdog Securities and Exchange Board of India (SEBI) has extended the deadline by one month for submission of bids by public sector banks and know-your-customer (KYC) Registration Agencies (KRAs) to conduct "in-person verification" of about three crore investors in the high-profile Sahara case to ascertain their genuineness, reports PTI.
 
SEBI had floated a tender in this regard on 2nd November and had earlier asked the public sector banks and KRAs to submit their applications by 22nd November.
 
However, SEBI has now decided to extend the deadline for bid submission to 21st December and would open the technical bids on the same day.
 
Earlier, the technical bids were scheduled to be opened on 22nd November, while a pre-bid meeting was held by SEBI with the interested parties on 7th November.
 
The selected 'In-Person Verification (IPV) Agency' would be mandated to interact "face-to-face" with all investors in the Sahara case to ascertain their genuineness. SEBI has been mandated by the Supreme Court to facilitate refund of about Rs24,000 crore with 15% interest to the bondholders of two Sahara group firms after ascertaining their genuineness.
 
In its order dated 31st August, the Supreme Court had asked SEBI to ascertain the genuineness of an estimated three crore bondholders of OFCDs (Optionally Fully Convertible Debentures) of two Sahara group companies (Sahara Housing Investment Corporation Ltd and Sahara Real Estate Corporation Ltd) and thereafter facilitate refund of the money with the interest.
 
In this regard, SEBI has decided to carry out in-person verification of these bondholders, for which it is seeking the services of public sector banks and KRAs.
 
The KRAs are authorised agencies to carry out KYC requirements for all the market entities, including brokerage firms and mutual funds.
 
The selected agency would have to meet the bondholders face to face to establish their existence, visit their given address to ascertain their residence proof and verify their original identity and address proofs vis-a-vis given details.
 
The IPV Agency would also have to get the copies of identity/address proofs signed by the bondholders and verify the documents related to investment in OFCDs vis-a-vis details provided by SEBI and its agencies.
 
SEBI is also in the process of appointing investigating agencies to assist it in this matter, while it is also hiring a Registrar and Transfer Agent (RTA) for investor data and payment processing related works in the case.
 
The RTA's job would involve scanning and verification of investor documents, setting up and managing of toll-free investor helpline and grievance redressal cell and processing of payments to the genuine investors.
 

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COMMENTS

Vikas Gupta

4 years ago

Sahara is a total fraud company. Now a days, its management is busy in transferring the funds from Schemes in Question by SEBI to its other schemes by its staff & Workers with a lot of incentives for them. Depositors must be warned about all these malpractices & Sahara must be penalised heavily for byepassing SEBI Orders.

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