MC EXCLUSIVE Rohit Salgaocar moves SAT as SEBI denies cross examination of Ketan Parekh in front-running probe

Rohit Salgaocar moves SAT as SEBI denies cross examination of Ketan Parekh in front-funning probe

Rohit Salgaocar, a Singapore citizen whom Securities and Exchange Board of India (SEBI) has accused of front running trades of big clients in connivance with controversial stock broker Ketan Parekh, has approached the Securities Appellate Tribunal (SAT). The move comes after SEBI denied his request to cross-examine Ketan Parekh. Front-running, which involves trading ahead of large client orders to profit from predictable price movement, is a serious market offence under securities law. The demand to cross examine Parekh is surprising as SEBI has accused both to be involved in front running trades and working in close co-ordination.

According to court documents accessed by Moneycontrol, Salgaocar sought the opportunity to question Parekh on grounds that the latter’s statements formed part of the investigative chain relied upon by SEBI. Salgaocar in his plea argued that without cross-examination, he would be denied a fair chance to contest claims that he engaged in front running activity through a network of accounts and access to non-public information (NPI) of large foreign clients’ trades.

Salgaocar’s plea in SAT, said “Once the statement has formed part of the evidentiary record and has been adverted to in the show-cause proceedings, the Appellant is entitled to test its veracity by cross-examination. Denial of this right vitiates the proceedings”. The plea further stated, “denying the Appellant's request to cross-examine Ketan Parekh violates principles of natural justice, as his statement was recorded and relied upon by SEBI in the SCN, for drawing adverse inferences against the Appellant. This rejection is particularly grave and serious given the existing and potential adverse civil consequences from SEBI's ex-parte directions”.

Salgaocar denied the allegations, stating that he was completely unaware of the alleged front-running scheme involving Ketan Parekh and others. He asserted that he had no role in the alleged misconduct, as he had no connection with any of the purported front runners (FRs) and did not even know them. He explained that the alleged NPI received from the traders of the Big Client was merely forwarded to Ketan Parekh for the bona fide and legitimate purpose of identifying willing counterparties for the trades. How Ketan Parekh used the alleged NPI, he said, was entirely beyond his control. At the time, he had no reason to suspect that Parekh would take or facilitate opposite positions based on such information.

Salgaocar also maintained that there had never been any financial transaction between him and Ketan Parekh. He added that there was nothing on record to even remotely suggest that Parekh or the alleged front runners had shared any purported profits from the alleged front-running activities with him.

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Salgaocar had sought inspection of documents during January-February and in July requested for cross examination of Ketan Parekh. SEBI, however, rejected the Salgaocar’s request in August, stating that Parekh’s recorded statement was not being used as evidence in the current proceedings, and therefore there was no basis to allow cross-examination.

SEBI replied to Salgaocar that, “please note that the request of the Noticee 1 to cross-examine Noticee 2 has not been acceded to by the Competent Authority, since the statement of Noticee 2 has not been exclusively used in the interim order cum SCN to draw any adverse inferences against Noticee 1”. Salgaoncar and Ketan Parekh were Noticee 1 and Noticee 2 respectively as SEBI’s interim order dated January 3rd, 2025.

In its interim order, SEBI accused Salgaocar of benefitting from advance knowledge of large trade orders and exploiting them through personal and connected accounts. SEBI observed that in statements dated March 7, 2024 and July 22, 2024, Salgaocar said he used to help the Big Client find counterparties for its trades in India. However, SEBI said analysis of Bloomberg chats between traders of the Big Client and Salgaocar showed that he provided false information about the identity of counterparties, which he was allegedly sourcing from Parekh. The order said NPI about impending orders of the Big Client was communicated by Salgaocar to Parekh.

The interim order said “there is a prima facie conclusion that the NPI pertaining to impending orders of the Big Client in various scrips were being communicated by Rohit Salgaocar to Ketan Parekh who was communicating trading instructions based on such NPI to other Noticees for execution of trades from the trading accounts of FRs.”

Salgaocar’s petition also says that SEBI’s interim order has damaged his reputation and is threatening his livelihood. Petition said, he faced several punitive actions, such as commission impoundment of Rs 27.06 crore, liability for illegal profits of Rs 38.70 crore of unknown parties, debarment from securities markets, and freezes on bank and demat accounts. As a result of this, the Big Client ended its relationship with him, damaging his reputation and threatening his livelihood.  Salgacar’s petition was filed on September 23 and is pending with the tribunal.

As per the order of the Special SEBI Court, the six accused in the case deposited Rs 38.70 crore, after which SEBI allowed the parties, including the broking firms and individuals, but excluding Parekh and Salgaocar;  to resume their activities in the market. Recently, the Special SEBI Court also allowed Ketan Parekh to travel abroad, subject to the deposit of Rs 27.06 crore, which represents the pending portion of the alleged illegal gains of Rs 65.77 crore attributed to the parties in the case.

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