Sebi settles suspected frontrunning of Aditya Birla MF's trades for Rs 2.8 cr, voluntary debarment for 6 months

The four entities applied for a settlement on May 18, 2023.

Following an investigation into suspected front-running of Aditya Birla Mutual Fund's trades, the market regulator allowed the parties concerned a settlement for a little over Rs 2.8 crore.

The applicants Maxgrow Fintrade, its director Bhavin Pankaj Doshi, Nitesh Kumar Jain and Atish Shah were asked to pay around Rs 96.08 lakh, Rs 62.4 lakh, Rs 68.9 lakh and Rs 62.4 lakh, respectively.

According to the settlement order released by the Securities and Exchange Board of India (Sebi) on April 26, the entities have also been asked to pay, jointly and severally, over Rs 85.11 lakh towards disgorgement of alleged unlawful gain (which includes simple interest of 12 percent per annum). The four entities have also accepted a voluntary debarment for a period of six months from the securities market for each.

Also read: How a Rs 5 note played a crucial role in Rs 1.3-crore-worth front-running racket

The market regulator had received an alert concerning the suspected front running of trades of Aditya Birla Mutual Fund Bhavin Pankaj Doshi and Maxgrow Fintrade Pvt. The regulator initiated an investigation into the suspected front running of the trades of ABMF between February 01, 2021, and December 31, 2021.

Based on the findings in the investigation, a show cause notice (SCN) dated April 11, 2023, was served to the applicants.

After an examination of order logs and trade logs, call data records, statements recorded on oath and other evidence, the SCN inter alia alleged the following:

1.The trades of Pankaj Doshi and Maxgrow Fintrade Pvt. Ltd. executed during the investigation period were alleged to have not been executed in the normal course of trading and were apparently in the nature of trades that were executed for front running the trades of the Big Client (the mutual fund house).

2.Doshi and his firm front run the trades of the mutual fund house, thereby violating various sections of the Securities and Exchange Board of India Act, 1992, read with regulations under SEBI (Prohibition of Fraudulent and
Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (PFUTP Regulations).

3. Nitesh Kumar Jain acted as the tipper and Atish Shah acted as the information carrier.

The four entities applied for a settlement on May 18, 2023. After the regulator's internal committee and high-powered advisory committee (HPAC) discussed and decided the settlement terms, the committee's suggestion was placed before Sebi's panel of whole-time members, who suggested a reconsideration of terms of settlement.

The internal committee met again on November 10, 2023, and asked the applicant to submit their revised settlement terms. The applicants submitted the revised terms on November 24, 2023.