The Securities and Exchange Board of India (SEBI) has barred 27 entities connected to dealers of Reliance Securities Ltd (RSL) for front-running. SEBI said it had unearthed a major racket of front-running by certain individual RSL dealers and entities linked to them, who were playing on prior access to buy and sell orders by Tata Absolute Return Fund.

SEBI’s internal surveillance system-generated front-running alerts against one Meena Ramnilal Vira in December 2019 and January 2020 for suspected front-running. These alerts referred to suspected front-running of trades of Tata Absolute Return Fund, a scheme of Tata Alternative Investment Fund.

SEBI followed it up with examination of KYC details, call data records, social media posts and Facebook connections of the suspected individuals and entities to probe relationships between various entities under its scanner in the matter.

“The order by the alleged front runner was placed (directly or indirectly) in advance of the big client order, while in possession of the non-public information. It is prima facie found that Harshal Vira, Bhavesh Gandhi and Abhijeet Jain were privy to the information with respect to the impending orders of the big client as they were the dealers (at RSL).”

SEBI found that Meena Ramnilal Vira was the mother of Harshal Vira, a dealer at RSL; all other entities who were front running too were connected.

“The entities in nexus placed orders of the first leg of their intra-day trade just prior to the order / last tranche of the order of the big client on a consistent basis (in terms of number of days and number of securities / contracts) during the examination period,” SEBI said.

SEBI found that the trading pattern showed deployment of BBS (Buy-Buy-Sell) and SSB (Sell-Sell-Buy) strategies, the typical modes of front-running under which traders buy or sell orders just before the final buy or sell order of the big client and then place sell or buy orders, respectively, after the price of the stock has risen or fallen following execution of the final order by the big client.

SEBI has banned all the 27 entities from the markets for violation of its PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) norms till further directions. The regulator is now studying their assets.