Regulator Securities and Exchange Board of India’s (SEBI) has barred three persons from the capital markets for indulging in “front running” activities in the matter relating to several funds of Fidelity Group.
SEBI has also directed the three persons - Vaibhav Dhadda (aka Avi Dhadda), Alka Dhadda and Arushi Dhadda - to open an escrow account with a nationalised bank and within 15 days jointly deposit Rs 1.86 crore, which has been prima facie found to be unlawful gain.
The order bars them from, “buying, selling or dealing in the securities market or associating themselves with securities market, either directly or indirectly, in any manner whatsoever till further directions.” They shall further “cease and desist from undertaking any activity in the securities market, directly or indirectly, in any manner whatsoever till further directions.”
SEBI’s surveillance system had generated alerts for possible instances of front running by certain entities during May-August, 2019 period. Following which, the regulator had conducted a preliminary probe to look into the possible violations of various norms, including PFTUP (Prohibition of Fraudulent and Unfair Trade Practices).
The SEBI probe found that Vaibhav, being the trader on behalf of the Fidelity Group, was in possession of non-public information of the impending trades of Fidelity Group entities. He is the son of Alka Dhadda and brother of Arushi Dhadda.
SEBI has further said that the trading pattern of Alka and Arushi suggests that they took advantage of the impending trading activity of Fidelity Group entities by front running and thereby generated profits for themselves by the price movement of scrips on account of large buy or sell orders of Fidelity Group entities.
The order reads, “The conducts of Avi, Alka and Arushi have prima facie defrauded the market as general investors have suffered because of their prima facie front runing activity.”
This front running activity by these persons resulted in encashment of benefit to the tune of Rs1.85 crore in the trading account of Alka and Rs28,500 in the trading account of Arushi.
By front running trades, they have prima facie sent misleading and distorted price and volume signals to the market participants and have violated PFUTP Regulations, the order further reads.