Deutsche Mutual Fund Front-Running Case: SEBI Imposes Rs15 Lakh Penalty on 6 Entities
Moneylife Digital Team 28 October 2022
Market regulator Securities and Exchange Board of India (SEBI) has imposed a penalty of Rs15 lakh on six entities in the case related to front-running trades of Deutsche Mutual Fund, now known as DHFL Pramerica Mutual Fund. 
In two separate orders, Asha Shetty, adjudicating officer (AO) of SEBI, stated, "...taking into consideration all other plausible factors, I am of the view that the abovementioned act of lending their support and thereby indulging in front running by the noticees are serious in nature, which in the instant case, had resulted into operating such trading accounts by the market manipulators for nefarious activities, which cannot be viewed leniently. Any such leniency shall invariably be viewed by the perpetrators of such scheme as an opportunity. Accordingly, I deem it appropriate to impose suitable penalty on the noticees, which acts as a deterrent to the noticees."
These entities include Kanchan Jena, Hemlata Dei Jena, Malati Lata Jena, Jayant Chhaparia, Abhishek Chhaparia and Progressive Share Brokers. Three sisters, Kanchan Jena, Hemlata Dei Jena, Malati Lata Jena have been asked to pay Rs5 lakh jointly, while Jayant Chhaparia and his son Abhishek will have to pay together Rs5 lakh as a penalty. 
SEBI order says the fund manager (FM) of Deutsche Mutual Fund knew the investment and impending orders of the Fund. "FM, through his parents, had opened four front-runner trading accounts of Noticee 1, 2, 3 and 4 (Jena sisters and Jayant Chhaparia). Father of FM, before the opening of trading accounts of aforesaid entities, had opened their email IDs by providing his mobile number and email ID."
The investigation using data obtained from broker and bank, by SEBI revealed that common Mac ID, IP address and device ID was used by the parents of the FM, Kanchan Jena, Malati Lata Jena, Hemlata Dei Jena and Jayant Chhaparia. "Based on the above it was alleged that the above entities were placing order from the same place or from the same device. Further, internet banking were also accessed from the same device for parents of FM, Kanchan Jena, Malati Lata Jena, Hemlata Dei Jena and Jayant Chhaparia," the market regulator observed. 
The AO, in her order, says, "the noticee (Progressive Share Brokers) had not acted with due skill, care and diligence while opening of trading account of Malati Lata Jena, which enabled the manipulators to carry out the nefarious activities by masking their identity..."
The AO then imposed a penalty of Rs5 lakh on Progressive Share Brokers.
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