Axis Asset Management Company has suspended two fund managers as part of its investigation into stock brokers’ complaints on alleged irregularities in placing of equity trading orders. Market regulator SEBI has also initiated a probe into this case to check for potential violation of norms.

The fund managers-cum-traders of the fund house have been placing orders at a value much higher or lower than the prevailing market price and receiving kick-backs from certain brokers for indulging in such unethical trading practice, sources said.

The development has surprised many retail investors even as SEBI, has been tightening mutual fund regulations to protect investors’ interest.

Axis AMC said it has been conducting a suo moto investigation over the last two months (since February) and has used reputed external advisors to aid the investigation. As part of the process, two fund managers have been suspended pending investigation of potential irregularities. We take compliance with applicable legal/regulatory requirements seriously and have zero tolerance towards any instance of non-compliance, it said.

Managed ₹7,778-cr AUM

Viresh Joshi, chief trader and fund manager, and Deepak Agarwal, assistant fund manager, are among those who have been removed from managing seven equity schemes. In an addendum issued on May 4, the fund house has removed their names from seven schemes, including Axis Arbitrage, Banking ETF, Nifty ETF, Consumption ETF, Quant Fund, Technology ETF and Value Fund which they were co-managing with other fund managers.

These funds together have assets under management of ₹7,778 crore with Arbitrage and Quant Fund having the highest asset of ₹5,785 crore and ₹1,530 crore, respectively, while Value Fund and Nifty ETF have an AUM of ₹240 crore and ₹126 crore, respectively. Banking and Technology ETFs have attracted investments of ₹56 crore and ₹29 crore, respectively, while the Consumption ETF has an asset of ₹12 crore.

In Axis Arbitrage, Joshi has been replaced by Ashish Naik, while in the Banking and Consumption ETFs, both Joshi and Agarwal have been replaced by Naik. Axis Quant Fund which was managed by Agarwal all alone, has been taken over by Naik and Hitesh Das. Technology ETF and Value Fund will now be managed by Jignesh Gopani and Hitesh Das.

Exposed by lavish lifestyle

SEBI is also looking into the functioning of the fund house and complaints on the lavish lifestyle of its employees.

According to sources, it was the flashy lifestyle of a fund manager that exposed the front-running scandal. One of the suspended managers drove a Lamborghini costing around ₹4.5 crore.

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