SEBI disposes of HDFC Mutual, arm case through consent order

The Securities and Exchange has disposed of the case against HDFC AMC, HDFC Trustee Company and Mr Milind Barve MD & CEO HDFC AMC for failing to prevent front running by two of the AMC's employees — Mr Rajiv R. Sanghvi and Mr Chandrakant P. Mehta — by a consent order.

SEBI had initiated adjudication proceedings against the three for violating SEBI's PFUTP regulations 2003 (prohibition of Fraudulent and Ufair Trade Practices), Mutual Fund regulations 1996, Portfolio Managers Regulations 1992, Brokers regulations 1992 and Clause IV (Operations Risk) in operating Manual for Mutual Funds.

SEBI alleged that the AMC failed to contain the act of front running by the two employees. The Trustee Company failed in its obligation of certifying that no key persons were involved in front running and the MD and CEO failed in his responsibility for the overall risk management function of the AMC.

The three noticees applied for consent and proposed consent terms of Rs 20 lakh each for the AMC and the Trustee Company and Rs 15 lakh for Mr Milind Barve.

The terms were placed before the High Powered Advisory Committee on June 14, and their recommendations conveyed to the noticees on July 5.

SEBI disposed of the pending proceedings on payment of Rs 55 lakh (in total) by the three noticees. However, the passing of this order is without prejudice to SEBI's rights to reopen the case or take enforcement action in case any representation made by the noticees are found to be untrue subsequently or there is a breach by the noticees of clauses/ conditions of any undertaking/ waivers filed during the current consent proceedings.

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