SEBI settles charges against Sanghvi in front-running case

MDT/PTI 07 September 2012

As per the settlement with SEBI, Sanjay Sanghvi paid Rs15 lakh and took a voluntary debarment from the market for 36 months, without admission or denial of guilt in the alleged front running in shares traded by HDFC Mutual Fund

New Delhi: Market regulator Securities and Exchange Board of India (SEBI) has disposed of a case against Sanjay Sanghvi, after he agreed to pay Rs15 lakh and take a 3-year voluntary debarment from the market to settle charges of fraudulent and unfair trade practices in the alleged front running in shares traded by HDFC Mutual Fund, reports PTI.

SEBI said that the settlement, which has been reached "without admission or denial of guilt", would apply to the charges levelled against Sanghvi in this matter alone.

SEBI had conducted an investigation into the alleged 'front running' activities that had taken place in a number of shares traded by HDFC Asset Management Company (AMC).

Front-running is an illegal market practice, wherein shares are traded based on prior information about the trading calls to be taken by institutional and other large investors.

On the basis of its preliminary findings, SEBI in June 2010 had prohibited some persons and entities from buying, selling or dealing in securities till further orders.

After completion of its probe, SEBI in February 2011 issued a show cause notice to Sanghvi, as he had allegedly violated the regulations about Prohibition of Fraudulent and Unfair Trade Practices in Securities Market.

While the proceedings were in progress, Sanghvi proposed a settlement in July 2011 under SEBI's consent order mechanism and thereafter revised the offer of settlement in September that year.

As per the revised terms of settlement, Sanghvi proposed to pay Rs15 lakh and undergo a voluntary debarment for a period of 36 months from buying, selling or dealing in the securities, directly or indirectly.

After deliberating over the consent proposal, SEBI's High Powered Advisory Committee (HPAC) recommended that the proceedings against Sanghvi may be settled on those terms.

These recommendations were accepted by SEBI and it communicated the same to Sanghvi in February this year.

Subsequently, SEBI passed the consent order, after Sanghvi paid Rs15 lakh and took a voluntary debarment from the market for a period of 36 months.

The regulator said that the consent order is without prejudice to its right "to initiate enforcement actions, including commencing or reopening of the proceedings pending against the applicant," if any representation made by him is subsequently discovered to be untrue, or the applicant breaches any of the consent terms or undertakings.

Separately, SEBI disposed of a case against Dhiraj Ghai, after he agreed to pay Rs1 lakh and take one-year voluntary debarment from securities market to settle alleged charges of fraudulent practices in trading of Alka Securities' shares.

"For the sole purpose of settling the matter on hand and without admission or denial of guilt on the part of the applicant (Ghai), the applicant has remitted a sum of Rs1 lakh," SEBI said in a consent order dated 3rd September.

Further, Ghai would voluntarily take debarment from dealing in securities market for one year from the date of this order, it added.

SEBI had observed a spurt in price and volume in the shares of Alka Securities during November 2008 and March 2009.

A probe had revealed that on many occasions, promoters of the company were involved in the off market transfers and these shares were subsequently traded at BSE.

The allegation was that Ghai had received 1,10,000 shares and sold these shares to the second-level entities and additional entities in off market during the investigation period.

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