Motilal Oswal pays ₹34.85 lakh to settle front-running case with Sebi

Front-running refers to an illegal practice in stock market where an entity trades based on advance information from a broker or analyst before the information has been made available to its clients

Motilal Oswal Financial Services on Thursday settled proceedings in connection with alleged lapses related to suspected front-running of trades of a large client, after paying Rs 34.85 lakh towards settlement charges. 

Front-running refers to an illegal practice in the stock market where an entity trades based on advance information from a broker or analyst before the information has been made available to its clients. 

 The order came after Motilal Oswal Financial Services Ltd (MOFSL) proposed to settle instant proceedings initiated against it, "without admitting or denying the findings of facts and conclusions of law".  "...it is hereby ordered that the proceedings initiated against the applicant (MOFSL) vide SCN (Show Cause Notice) dated February 20, 2025, is disposed of in terms of settlement terms," Sebi's Quasi Judicial Authority Santosh Shukla said in the order.

 

 Reacting to the order, a Motilal Oswal Financial Services spokesperson said, "The Sebi settlement order announced today (Thursday) relates to involvement and non-maintenance of records by one of our authorised partners (AP)-Om Securities." "We had to opt for the settlement route and the matter now stands resolved," the spokesperson said.

       The matter arose from an investigation carried out by the Securities and Exchange Board of India (Sebi) to ascertain whether the trades of an entity (big client) was front run by certain entities i.e Chaturvedi Group during the period January 1, 2022 to December 8, 2023. 

Following the probe, the regulator issued a show cause notice to MOFSL on February 20, 2025. It was alleged that the brokerage failed to exercise due skill and care expected of a registered stock broker by not keeping proper records of client order instructions. 

The markets watchdog also charged MOFSL with attempting to create supporting documents after the execution of trades, raising concerns over compliance standards, thereby flouting Sebi's (Stock Brokers) regulations, as per the order. 

Pursuant to filing a settlement application in March this year, Motilal Oswal Financial Services filed revised settlement terms, which was approved by the markets watchdog.  Under the terms, MOFSL paid Rs 34.85 lakh to the regulator, which was confirmed by Sebi on September 17. 

Sebi stated that the proceedings initiated through the show cause notice stand disposed of in terms of the settlement.  The regulator, however, clarified that it retains the right to act if representations made by the company are later found untrue, or if there is any breach of the settlement terms.