Axis MF front-running case: Sebi bars Viresh Joshi for 7 yrs in final order

Sebi bars former Axis Mutual Fund chief dealer Viresh Joshi for seven years and imposes a Rs 3 crore penalty in the final order on the front-running case

The Securities and Exchange Board of India (Sebi) on Friday barred Viresh Joshi, former chief dealer of Axis Mutual Fund (MF), for seven years from the securities market and imposed a penalty of ₹3 crore for alleged front-running trades of the fund house.

 

In the final order, Sebi has also imposed a bar on 20 others connected to the matter for terms ranging from three years to seven years, and penalties ranging from ₹10 lakh to ₹1 crore. 

 

The market regulator had issued an interim order cum show-cause notice in the matter in February 2023.

 

It had estimated the total wrongful gains through front-running to be around ₹30.55 crore through dealings between September 1, 2021 and March 31, 2022, which were impounded after the interim order.

 

 

The final order notes that the period of debarment already undergone since the interim order will be set off against its restraint directions.  

 

It also says that Joshi took advantage of his position, and passed non-public information regarding the trades of Axis MF to certain external players connected to him, who then placed the front-running trades from Dubai and facilitated formation of offshore entities where the unlawful gains were deposited.

 

Open dealer integrated network (ODIN) terminals provided by Marfatia Stock Broking and Woodstock Broking were used to place orders from Dubai, after receiving information on the impending orders by Axis MF. Further, several mule accounts were used to trade the scrips.

 

Evidence gathered during the investigation, including WhatsApp chats, suggested coordinated communication among the accused, with coded identities such as ‘jadugar’ and ‘asdfg’.

 

Interestingly, several of the other alleged manipulators in this matter have been found be a part of manipulation activities in other scrips — unrelated to Joshi.

 

“Mutual funds are managed for the benefit of the unit holders. Any conduct that exploits confidential information regarding the implementation of schemes undermines that arrangement, as it places private gain ahead of the fund execution quality and interest of the investors,” notes the final order.

 

Front-running means taking personal trade positions ahead of any big transaction — which may have an impact on the prices of the scrip — a modus operandi for quick profits. As the information is not public and hampers the confidence of unit-holders of mutual funds, such practices are considered fraudulent.

 

The regulator noted that the money impounded as per the directions in the interim order of 2023 will be treated as the disgorgement amount and will be transferred to the Investor Protection and Education Fund (IPEF).