Two entities settle front running case with Sebi; pays Rs 67.62 lakh

Labdhi Enterprises and Falguni Ketan Parekh have settled with Sebi a case pertaining to alleged front running of trades of Tata Absolute Return Fund after a payment of Rs 67.62 lakh as settlement amount.

Tata Absolute Return Fund is a scheme of Tata AIF (Alternative Investment Fund).

The settlement came after Labdhi Enterprises and Parekh filed a joint settlement application to settle the pending proceedings "without admitting or denying the findings".

"The proceedings that may have been initiated for the alleged violations ... are settled qua the applicants," Sebi said in its settlement order passed on Friday.

As per the order, the Securities and Exchange Board of India (Sebi) conducted a preliminary examination to ascertain that certain entities had been front running the trades of Tata Absolute Return Fund (TARF) between December 2019 and August 2020.

Thereafter, Sebi passed an interim order in August 2020, directing the applicants to deposit the proceeds that they had made from engaging in front running the trades of TARF in the escrow account.

It also restrained the applicants from accessing securities markets till further orders.

Based on the findings of interim order, the regulator conducted a detailed investigation in the matter and found that Parekh who was the only working partner in Labdhi Enterprises was responsible for managing the affairs of the firm including placing orders in the securities market.

Further, a show-cause notice issued on May 2022, which alleged that Parekh had access to non-public information of all impending orders of TARF and on the basis of that information, trades were executed from the trading account of Labdhi Enterprises in the equity derivatives segment during the period from January 2020 to May 2020.

It also alleged that the applicants made a profit of Rs 16.92 lakh.

Pursuant to the receipt of the application, the internal committee of Sebi met with the applicants after they proposed the revised settlement terms to settle the enforcement proceedings pending against them.

Further, a high powered advisory committee (HPAC) of Sebi approved the terms proposed by the applicants and recommended the case for settlement upon payment of Rs 50.70 lakh as setttlement amount and Rs 16.92 lakh as disgorgement.

The applicants informed the market watchdog about the remittance of the settlement amount on November 17 and Sebi has confirmed the credit of the same.

Also, the disgorgement amount has already been impounded and transferred in the escrow account in favour of Sebi by the applicants, the order added.