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SEBI has barred Nilesh Kapadia and three others from the markets for 10 years in the front running case at HDFC Mutual Fund. The market regulator also directed three individuals — Rajiv Ramniklal Sanghvi, Chandrakant P Mehta and Dipti Paras Mehta — to return over ₹1.75 crore they got through illegal gains.
Deposit disgorged amountIn his 59-page order, Whole-time Member Prashant Saran said the 10-year period for them would be calculated after taking into account the restraint already undergone by them through an interim order dated June 17, 2010.
Besides, Sanghvi (₹1.129 crore), Mehta (₹22.65 lakh) and Paras (₹41.331 lakh), who were not directly linked with HDFC MF but were found to be ‘associated persons’ with Kapadia in terms of their market dealings, were directed to deposit the disgorgement amount. The ban order would increase by five years if they fail to deposit the amount within 45 days.
The matter relates to trades conducted in 2007 as the exchanges found “certain coincidence” between the trading pattern of the three individuals with that of HDFC Asset Management Company, and referred the issue to SEBI.
The regulator had found that trade orders of HDFC AMC were getting executed through a common dealing desk within the AMC, and Kapadia, then Assistant Vice-President (Equities), was its equities dealer since June 2000.
Tipping offThe investigation had also revealed that Kapadia was tipping off and advising Sanghvi to trade ahead of the orders of HDFC MF and had helped him make substantial gains in the process.
SEBI in its interim order in June 2010 directed the HDFC AMC not to utilise the services of Nilesh Kapadia for the trading activities and asked the fund house to institute an internal inquiry.
Kapadia had quit the fund house on the same day the interim order was passed.
In October 2011, HDFC MF and its CEO Milind Barve had reached a consent settlement with the markets regulator for a payment of ₹55 lakh. While HDFC AMC and HDFC Trustee Co Ltd paid ₹20 lakh each, Barve paid ₹15 lakh towards settlement charges.
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