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Capital markets regulator SEBI has banned three individual investors Vaibhav Dhadda (alias Avi Dhadda), Alka Dhadda and Arushi Dhadda from trading in the equity markets for front-running in various funds of Fidelity Group.
Front-running, in market parlance, means buying or selling securities ahead of a large order so as to benefit from the subsequent price move.
In an interim order issued on Wednesday, SEBI had said the three individuals are restrained from buying, selling or dealing in the securities market or associating themselves with the securities market, either directly or indirectly, in any manner whatsoever till further directions.
The regulator has directed the investors to jointly open an escrow account with a nationalised bank and deposit ₹1,86,04,343 within 15 days. The amount was prima facie found to be unlawful gains made, it said.
Freezes bank accounts
The regulator has also frozen the bank accounts of the individual investors to prevent them from diverting the wrongful gains made from the front-running trades.
SEBI said its surveillance system had generated alerts for possible instances of front-running by certain entities between May and August this year. Following this, the regulator had conducted a preliminary probe to look into the possible violation of various norms, including Prohibition of Fraudulent and Unfair Trade Practices.
The SEBI probe found that Vaibhav, being the trader on behalf of the Fidelity Group, was in possession of non-public information of the impending trades of Fidelity Group entities. He is the son of Alka Dhadda and brother of Arushi Dhadda.
Taking advantage
The trading pattern of Alka and Arushi suggests that they took advantage of the impending trading activity of Fidelity Group entities by front-running and thereby generated profits for themselves by the price movement of scrips on account of large buy or sell orders of Fidelity Group entities, said SEBI.
The conducts of Avi, Alka and Arushi have prima facie defrauded the market as general investors have suffered due to their front-runing activity, it said.
Front-running activities of these persons resulted in benefit of ₹1.85 crore in the trading account of Alka and ₹28,500 in the trading account of Arushi, said SEBI.
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