The Securities and Exchange Board of India (Sebi) has barred 21 entities, including former chief trader of Axis Mutual Fund Viresh Joshi, from the securities market for alleged front-running activities that saw the fund house sack two of its employees last year in May.
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In a 96-page long interim order-cum-show cause notice issued late on Tuesday, the capital market regulator stated that the cumulative amount of unlawful gains made by the entities was nearly ₹30.56 crore, which will now be impounded.
According to the Sebi probe, the “suspected period of front running spans for almost two years, and a host of entities and trading members are suspected to be involved in the front running activities at various points in time during the said two years’ period”.
The roots of the matter go back to May last year when amidst reports of alleged front running by its chief trader Joshi and Assistant Fund Manager Deepak Agrawal, the fund house sacked the duo with immediate effect – the fund house had said that it had initiated a suo moto investigation in February.
Incidentally, Agrawal has not been named in the Sebi order passed on Tuesday.
“During the course of investigation, it was noted that the Noticees connected to Mr. Viresh Joshi, the then Chief Dealer of Axis MF were observed to have traded in different securities ahead of the impending orders placed on behalf of the Big Client (Axis MF),” stated the Sebi order.
“It was also noted that the trading accounts of the connected Noticees from which the front-running trades were executed, were arranged by Mr. Sumit Desai, apparently a market operator at the behest of Mr. Viresh Joshi,” added the order.
The Sebi probe further found that Joshi “incorporated a company in Dubai apparently for indulging in such fraudulent acts including transferring the wrongful gains using clandestine channels in the bank accounts” of the company.
The capital markets regulator has further clarified that a number of “parallel and separate proceedings” related to the front-running matter at Axis MF are in progress and are at “different stages of investigation involving different entities”.