SEBI Barres Eight Entities From Securities Market, Seizes Rs 1.3 Crore 'Unlawful Gain'

Markets regulator SEBI on Friday barred eight entities from the securities markets and impounded 'unlawful gains' of Rs 1.3 crore earned by them from front-running activities.

The eight entities are Ashok Maheshwari, Darshan Bakul Shah, Khusboo Darshan Shah, Darshan Bakul Shah, Benzer Department Stores Pvt Ltd, CHL Stock Concepts Pvt Ltd, Chirag Mahendra Shah, and Mihir Dhirajalal Savla.

Front-running refers to an illegal practice in the stock market where an entity trades based on advance information from a broker or analyst before the information has been made available to its clients.

Ashok Maheshwari was one of the dealers of stock broker ABC Securities Ltd, and was responsible for placing trading orders for the Big Client, which was engaged in the business of portfolio management services.

In its 77-page order, Sebi found that Ashok Maheshwari was instrumental in supplying the information about the impending trades of the Big Client to Darshan Bakul Shah and such information was utilised to execute front running trades.

Apart from trading in his own account, Darshan Bakul Shah used the accounts of his family members -- Khusboo Darshan Shah, Darshan Bakul Shah (HUF), Benzer Department Stores Pvt Ltd, CHL Stock Concepts Pvt Ltd and Chirag Mahendra Shah.

Mihir Dhirajalal Savla was the director of Benzer Department Stores.

"When the Big Client, unaware of the conduct of the Noticee no. 1 (Ashok Maheshwari) was instructing him to execute trades on its behalf and such instructions were prima facie encashed by the Noticee no. 1 by sharing the same to the Noticee no. 2 (Darshan Bakul Shah)."

"When the information reached the Noticee no. 2, he acted in asystematic manner and trades were executed in different accounts which cumulatively generated unlawful profits (Rs 1.30 crore approx)," SEBI said.

By indulging in such trades, the entities violated the provision of Prohibition of Fraudulent and Unfair Trade Practices norms, it said.

Accordingly, SEBI banned the eight entities "from buying, selling or dealing in securities, either directly or indirectly, in any manner whatsoever until further orders."

It has been clarified that the restraint imposed on them be operative only against the proprietary trades of Darshan Bakul Shah as well as CHL Stock Concepts and is not applicable on the trading of their clients.

Maheshwari has also been restrained from associating himself with any intermediary registered with Sebi in any capacity till further orders.