Ketan Parekh among 3 banned from securities markets in front-running scheme

Sebi directs Rs 66 crore disgorgement

The Securities and Exchange Board of India (Sebi) on Thursday debarred Ketan Parekh, the stock market operator involved in the stock market scam of 2000, Singapore-based trader Rohit Salgaocar, and one other individual from the securities market for alleged front-running of trades of a United States (US)-based foreign portfolio investor (FPI).

 

The FPI manages around $2.5 trillion worth of funds globally.

 

In a 188-page interim order against 22 individuals and entities, the market regulator has directed disgorgement of Rs 65.77 crore of illegal gains made through the alleged scheme. Sebi has also frozen the bank accounts of the 22 entities for any debit.

 

Sebi’s findings indicate that Parekh and Salgaocar were running the alleged scheme for almost 2.5 years and were caught following a new alert model for identifying information-based trades.

 

The market regulator has alleged that Parekh, who was earlier debarred from the stock markets for 14 years for his role in the infamous stock market scam of 2000, orchestrated a new method for front-running trades by staying out of the regulatory ambit.

 

While Salgaocar provided the information on forthcoming trades of the FPI, which he had access to, Parekh built the positions through his various associates in Kolkata.

 

Salgaocar had a referral agreement with Motilal Oswal Financial Services (MOSL) and Nuvama Wealth Management to refer the trades of the US-based FPI to them.

 

Sebi carried out a search and seizure operation in June 2023 at 17 premises in a joint investigation with other authorities.

 

“While the traders of the Big Client (FPI) were discussing trades with Rohit Salgaocar to ensure counter-parties for their trading, Rohit Salgaocar was using that information to make illegal profits by routing information to Ketan Parekh. When the information reached Ketan Parekh, he acted in a systematic manner, and trades were executed in different accounts, which cumulatively generated unlawful profits,” noted whole-time member Kamlesh Varshney in the Sebi order.

 

The order highlighted the need for interim action, noting Parekh’s involvement in the previous scam and his status as a habitual offender.

 

The 22 entities mentioned in the order include front-runners, stock brokers, facilitators, and directors of several other firms.

 

Parekh used to instruct the front-runners using different mobile phones registered under various names and was known as ‘Jack,’ ‘John,’ ‘Boss,’ ‘Bhai,’ among other aliases.

 

To confirm Parekh’s identity, the market regulator analysed chats, messages, mobile phone locations, IMEI numbers, hotel bookings, and even birthday messages.

 

The money transfers between the entities were carried out through Angadiyas, or unofficial channels for cash transfers facilitated by individuals acting as couriers.

 

Sebi has also forwarded a copy of the order to Nuvama and MOSL to enable them to take appropriate actions for strengthening their internal controls to prevent such violations.

 

Parekh was convicted of price manipulation and circular trading in the stock market scam of 2000.