The Securities and Exchange Board of India (Sebi) on Tuesday barred 21 entities including the ex-chief trader of Axis Mutual Fund in the alleged front-running case. In an interim order released by Sebi, the market watchdog has restrained 21 individuals from buying, selling, or dealing in the securities market or associating themselves with the securities market, either directly or indirectly. Sebi has also alleged unlawful gains worth Rs 30.5 crore.
The market regulator has noted that the 21 individuals named in the interim order have allegedly violated securities law through prima facie front-running activities.
"Under the aforesaid circumstances and my observations, and also keeping in view the commission of the alleged violation of securities laws by the Noticees through their prima facie front running activities, which have prima facie led to unlawful enrichment of the Noticees consistently in a regular manner by way of executing front running trades in the manner discussed as above, I observe that it is a fit case to pass interim directions to insulate the securities market from the mischievous acts of the Noticees as well as to protect the wrongful gains from getting siphoned off beyond the regulatory reach," Sebi’s interim order noted.
The regulator has directed the 21 noticees to deposit the unlawful gains in an escrow account within 15 days. Banks have also been directed that no debits shall be allowed, without permission of SEBI, out of the bank accounts held jointly or severally by the noticees.
The Registrar and Transfer Agents have also been directed to not permit any transfer or redemption of the securities, including Mutual Funds units, held by the 21 individuals.
Sebi has also put a ban on the disposal of assets, properties, and securities by the 21 individuals till the time the amount of wrongful gains is credited to the escrow account.
The order noted that Viresh Joshi has indulged in market manipulation and fraudulent trade impacting the trust reposed by investors in Axis MF.
"Viresh Joshi has conducted himself as a dealer of Axis MF in conceiving a fraudulent scheme and executing the said scheme so meticulously over a sustained period in collusion with other unscrupulous entities to front run the trades of his very own mutual fund where approx. 66 lakh unit holders have put an aggregate sum of AUM of Rs 2.52 lakh crore (as on March 31, 2022), it smacks of rampant dishonesty and unfairness on the part of Viresh Joshi and his accomplices," the order noted.
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Axis Mutual Fund came under the front-running allegation in 2022 and later on sacked two officials including Viresh Joshi following an internal investigation.
Commenting on the development, Axis Mutual Fund said that the order is an ad interim ex parte order against Viresh Joshi (the former chief dealer of Axis AMC) and his accomplices (none of whom are employees of Axis AMC).
"There are no findings or directions against Axis AMC in this order nor any impact on our operations. We continue to cooperate with regulatory authorities in this matter," it added.
First Published: Feb 28, 2023 10:45 PM IST
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