Two individuals pay Rs 91 lakh to settle front-running case with Sebi

Two individuals on Wednesday settled a case pertaining to an alleged front-running with Sebi by paying a settlement fee of Rs 91 lakh.

Apart from the settlement amount, these two individuals -- Meghana Gosar and Devan Sangoi -- have to comply with other conditions to settle the matter, the capital markets regulator said. 

One of the conditions included a disgorgement amount of Rs 27.77 lakh to be paid by Gosar.

The disgorgement amount is to be paid along with 12 per cent per annum from the date of violation (April 30, 2022) till the date of filing of the settlement application, Sebi said in the settlement order.

Also, Gosar and Sangoi will voluntarily debarred themselves from accessing as well as dealing in the securities markets for six months.

The order came after the applicants proposed to settle by neither "admitting nor denying the findings of fact and conclusions of law" by filing two separate settlement applications.

"In exercise of the powers...in terms of the settlement regulations, it is hereby ordered that any proceedings that may be initiated for the violations are settled in respect of the applicants," Sebi's whole time members Kamlesh C Varshney and Ananth Narayan G said in the order.

The Securities and Exchange Board of India (Sebi) conducted an investigation to probe the potential front-running of the trades of an entity (Big Client) executed during the period August 2021 to April 2022 by Meghana Gosar.

Devan Sangoi, brother of Meghana, was the Chief Investment Officer at the Big Client and thus was privy to the information related to trades/ scrips being executed/invested by the Big Client.

In its investigation, Sebi observed that Gosar squared off profits worth Rs 20.74 lakh for the 52 front-running instances of trades in the equity segment and Rs 7.04 lakh for the 18 front-running instances of trades in the equity derivatives segment and thereby made total unlawful gains of Rs 27.77 lakh.

Thus, by virtue of his position as the chief investment officer at the Big Client, Devan Sangoi was alleged to be privy to information about the scrips and trades to be executed by the Big Client.

Further, Sangoi was also alleged to be front-running of the Big Client where Meghana provided her trading account credentials for the execution of trades.

On account of the same, the two applicants have allegedly violated the provisions of PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) norms.

Thereafter, the applicants filed revised settlement terms to settle any enforcement proceeding that may be initiated against it for the alleged violations which was confirmed by Sebi's High Powered Advisory Committee (HPAC).

Apart from remitting the disgorgement amount by Gosar, the applicants paid Rs 91 lakh collectively to settle the matter.