Market regulator Securities and Exchange Board of India (SEBI) has imposed a total penalty of Rs 40 lakh on two brokerage firms and their directors for allegedly facilitating front-running of trades executed by Axis Mutual Fund between April 2021 and March 2022.
SEBI has imposed a penalty of Rs 10 lakh each on Woodstock Broking Pvt Ltd, its director Suresh Kanmal Jajoo, Marfatia Stock Broking Pvt Ltd and its director Nishil Surendra Marfatia. However, the regulator has disposed of adjudication proceedings against the remaining six noticees without imposing any monetary penalty.
The investigation was initiated after alerts generated by SEBI's surveillance system indicated possible front-running of trades executed by Axis Mutual Fund, which was identified as the 'Big Client'.
According to the investigation findings, Viresh Joshi, then chief dealer at Axis Mutual Fund, was allegedly the information provider. The investigation identified nine suspected front-running entities and examined the role of several intermediaries, including arrangers and brokers.
The allegations against Woodstock Broking and Marfatia Stock Broking included facilitating the execution of front-running trades by providing access to trading terminals and operational support for running these terminals from outside India.