Capital markets regulator SEBI has restrained six entities, including Banhem Stock Broking and Ninja Securities, from the securities market and impounded wrongful gains of Rs 2.23 crore from them for involving in front running trades of Anvil Wealth Management.
Apart from these two, the other entities banned by the regulator are Kaushal Chandarana, Manish Mehta, Kashmira Mehta and Sumatilal Mehta. Also, the entities have been directed not to dispose of any of their assets or securities, till such time the amount of wrongful gains is credited, the Securities and Exchange Board of India (SEBI) said in its interim order on Tuesday.
In its order, SEBI found that Ninja and Banhem traded in different securities ahead of the impending orders placed on behalf of portfolio management service provider Anvil Wealth Management. It was further noted that the common director of Ninja and Banhem -- Manish Mehta -- was connected with Kaushal Chandarana, portfolio manager of Anvil.
It was observed that a scheme was hatched by Mehta and Chandra, wherein the former would pass on the information of the impending trade orders of the big client (Anvil) to the latter, who would then place orders from the trading accounts of his connected entities, Ninja and Banhem, thereby front running the trades of big client.
"Ninja, Banhem, Sumatilal Mehta and Kashmira Mehta have also played an equally vital part in the execution of those prima facie front running trades as they enabled Kaushal and Manish to execute front running trades from the trading accounts of Ninja and Banhem, that led to the prima facie violation of ...PFUTP Regulations," SEBI said.
Through such prima facie front running activities, the six entities made wrongful gains to the tune of Rs 2.23 crore. Accordingly, SEBI has prohibited the entities from "buying, selling or dealing in the securities market or associating themselves with the securities market, either directly or indirectly, in any manner whatsoever until further orders''.
In addition, "an amount of Rs 2.23 crore being the estimated total wrongful gains earned from the prima facie front running activities is impounded, jointly and severally from the noticees," it added. Front-running refers to an illegal practice in the stock market where an entity trades on the basis of advance information from a broker or analyst before the information has been made available to their clients.
The order came after the surveillance system in NSE generated certain alerts indicating that trades by certain suspected entities executed during March 2020 to June 2021 appeared to be unusual trades and were apparently in the nature of trades that were executed for front running the trades of Anvil Wealth Management Pvt. Ltd., a portfolio management service provider.
After this the Securities and Exchange Board of India (SEBI) initiated an investigation against those suspected entities to look into the possible violations of PFUTP (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) rules during March 2020 to September 2022.