Seize gains in HDFC MF front-running case: Sebi

The said 2000 case allegedly led to unlawful gains to seven entities of two different groups

Capital markets regulator Securities and Exchange Board of India (Sebi) has issued an order to seize allegedly unlawful gains made by six entities in a case involving India's largest mutual fund house, HDFC MF.

Front-running is the unethical practice of a broker trading an equity based on information from the analyst department before his or her clients have been given the information.

This case dates backs to 2000 and involves Nilesh Kapadia, then dealer with HDFC MF. It apparently resulted in ill-gotten gains to seven entities of two different groups, Sanghvi and Kalpan. Put together, the beneficiaries made a gain of nearly Rs 1.5 crore.

Sebi has decreed annual interest of 12 per cent from the date theses were earned and ordered impounding of assets worth Rs 3.35 crore.

Call record details and transcripts from HDFC MF helped Sebi establish how these entities benefited through front-running.

As Kapadia was a dealer at HDFC AMC from 2000 to 2010, there was access to information.

These entities are also directed not to dispose of or alienate any of their assets till the amounts decreed are credited to an escrow account, Banks and depositories are also directed accordingly.

In 2014, Sebi had imposed a 10-year ban on Kapadia and three others entities in the same matter.