Market regulator Securities and Exchange Board of India (SEBI) has issued show-cause notices (SCNs) to six foreign portfolio investors (FPIs) linked to US-based asset manager Capital Group in connection with an alleged front-running network involving market operator Ketan Parekh (KP) and Singapore-based trader Rohit Salgaocar.
According to media reports, SEBI has initiated proceedings against six FPIs managed by Capital Group, including Smallcap World Fund, American Funds Insurance Series Growth-Income Fund, American Funds Fundamental Investors, The Growth Fund of America, AMCAP Fund and Capital Group AMCAP Fund (Lux).
The notices reportedly stem from SEBI’s ongoing investigation into the alleged leak of confidential trading information regarding large institutional orders executed between January 2021 and June 2023.
According to
a report by the Economic Times (ET), SEBI alleged that details of impending buy and sell orders — including stock names, quantities and prices — were systematically shared with Mr Salgaocar before the trades were executed in the market.
The information was allegedly passed on by two Capital Group traders, James Vincent Cheng and Terence Tsai, who reportedly handled around 90% of the firm’s India-related trading activity.
SEBI alleged that Mr Salgaocar subsequently relayed the non-public information to KP and an associated network of traders, enabling them to take positions in shares before institutional trades and profit from price movements.
The ET report says SEBI examined Bloomberg chat logs and WhatsApp communications as part of its investigation and concluded that the information exchange operated as an informal channel under the guise of 'sourcing liquidity' or identifying counterparties for large block deals.
According to
a report from Hindu BusinessLine, SEBI had earlier referred to the institutional investor only as a 'big client' in its interim order issued in January 2025 against Mr Salgaocar and others. The latest proceedings mark the first time Capital Group has been specifically identified in connection with the matter.
Capital Group, which manages more than US$3.3tn (trillion) in global assets, reportedly declined to comment due to the ongoing proceedings, while SEBI did not respond to media queries.
BusinessLine reported that Mr Salgaocar, a director at Strait Crossing Pte Ltd, had referral arrangements with Indian intermediaries Motilal Oswal Financial Services and Nuvama Wealth Management for routing institutional trades.
The newspaper further reported that Mr Salgaocar has challenged SEBI’s interim order before the securities appellate tribunal (SAT). In November 2024, the Tribunal reportedly allowed his plea seeking cross-examination of Mr Parekh and directed SEBI to facilitate the process.
Legal experts quoted by BusinessLine said the case could trigger tighter scrutiny of internal controls and information-sharing practices followed by institutional investors and intermediaries while handling large trades.
As a backgrounder, a detailed January 2025 report by Moneylife had raised questions about the identity of the 'big client' mentioned in SEBI’s interim order and suggested that the Los Angeles-based Capital Group may have been linked to the investigation.
SEBI’s 188-page interim order detailed what it described as an elaborate front-running operation involving Ketan Parekh, multiple associates and a network of traders allegedly using coded communication, multiple mobile phones, cash transactions and Angadia channels to conceal their activities.
The report also questioned how KP, described by SEBI as a 'habitual offender' and a central figure in the 2001 stock market scam investigated by a joint parliamentary committee (JPC), allegedly continued to operate in the securities market despite previous bans and regulatory action.
Moneylife further argued that the front-running investigation highlighted wider concerns about dabba trading, weak coordination among enforcement agencies and gaps in surveillance systems, and called for a multi-agency probe involving SEBI, Reserve Bank of India (RBI), tax authorities and enforcement agencies.
In its January 2025 interim order, SEBI directed disgorgement of alleged unlawful gains amounting to ₹65.77 crore from 22 entities linked to the front-running network and barred key individuals from accessing the securities market.
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