Mirroring-of-trades case settled for Rs 44.2 lakh by one of three investigated

SEBI investigations revealed that Pawan Agarwal had violated provisions of Section 12(A)(c) of SEBI Act and Regulation 3(a), 3(d) and 4(1) of PFUTP Regulations.

One of three people alleged to have mirrored trades of an investment company has paid a settlement amount of Rs 44.2 lakh, an order from the market regulator revealed.

According to the settlement order issued by the Securities and Exchange Board of India (SEBI), Finsec Law Advisors had filed a complaint alleging that Pawan N Agarwal and two others had violated the provisions of SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to the Securities Market) Regulations, 2003, or PFUTP Regulations by engaging in front running/ mirror trading of trades of its clients Aequitas. Aequitas is a boutique investment company that caters to ultra-high net-worth individuals, family offices and foreign portfolio investors.

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Following this, SEBI launched an investigation into whether these regulations and Sebi (Stock Broker and Sub Broker) Regulations, 1992 were violated. The investigation revealed that Agarwal had violated provisions of Section 12(A)(c) of SEBI Act and Regulation 3(a), 3(d) and 4(1) of PFUTP Regulations.

The market regulator started adjudication proceedings in November 2021. A showcause notice dated April 2022 was served to Agarwal, asking why an enquiry should not be initiated against him and why a penalty should not be imposed.

On June 20, 2022, Agarwal informed the regulator that he had filed a settlement application under the Sebi Settlement Regulations.

The regulator’s Internal Committee then recommended a settlement amount of Rs 44.2 lakh. The High Powered Advisory Committee on Settlement considered the settlement terms in March 2023 and recommended settlement of instant proceedings on payment of the said amount.

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The SEBI order stated, “Therefore, in view of the acceptance of the settlement terms by the Panel of Whole Time Members and receipt of the settlement amount by SEBI, the instant proceedings initiated against the Applicant vide Show Cause Notice dated April 22, 2022, is disposed of, as per approved settlement terms mentioned above in terms of Section 15JB of SEBI Act read with Section 19 of SEBI Act read with Regulation 23(1) of the Settlement Regulations.”