The SEBI headquarters in Mumbai, India (Photographer: Adeel Halim/Bloomberg)

SEBI Passes Order Against Certain Entities In HDFC Mutual Fund Front Running Case

Markets regulator Securities and Exchange Board of India today directed six entities, including five individuals, to disgorge illegal gains made in the HDFC Mutual Fund front running case.

Rajiv Sanghvi, Rajiv Sanghvi-HUF, Sanjay Sanghvi, Sonal Sanghvi, Dipti Mehta and Kalpana Kapadia have been asked to disgorge the wrongful gains along with a simple interest of 12 percent per annum, according to a SEBI order. This would be applicable from the respective dates of their transactions till the respective dates of deposit of the respective amounts in escrow accounts in compliance with the Securities Appellate Tribunal’s March 4 ruling.

SEBI had carried out an investigation into the matter of front-running by certain entities between June 2000 and June 2010. SAT passed an order in the matter on March 4, 2016.

As per the latest SEBI order, these were the illegal gains made:

  • Rajiv Sanghvi: Rs 27 lakh
  • Rajiv Sanghvi-HUF: Rs 9.7 lakh
  • Sanjay Sanghvi: Rs 39.8 lakh
  • Sonal Sanghvi: Rs 20 lakh
  • Dipti Mehta: Rs 8.3 lakh
  • Kalpana Kapadia: Rs 47.2 lakh

Besides, the watchdog has asked banks and depositories -- with whom the entities' accounts lie -- not to make any debit without its permission. “The entities are also directed not to dispose of or alienate any of their assets or properties or securities, till such time the direction of this order is complied with,” the order noted.

Front-running refers to an unethical practice of someone trading in shares on the basis of advance information given by a broker, analyst or other executive at a market intermediary before the trades are conducted by that entity. In January 2016, SEBI had ordered seven entities to disgorge Rs 3.35 crore worth of illegal gains made by them in the matter.