Axis Mutual Fund has made some management level changes in seven of its mutual fund schemes. They are: Axis Consumption ETF, Axis Banking ETF, Axis NIFTY ETF, Axis Arbitrage Fund, Axis Quant Fund, Axis Technology ETF and Axis Value Fund.
This high level management changes comes after the fund house came under scanner of the Securities and Exchange Board of India (Sebi) for alleged violations.
What Happened To Those Two Fund Managers?
According to sources privy to Outlook Money, the Bloomberg IDs of Viresh Joshi and Deepak Agarwal of Axis Mutual Fund were deactivated since the evening of May 4. What this means is that the said persons could be barred from accessing the markets since now their trade terminal IDs are deactivated.
The Bloomberg Terminal is a computer software program provided by Bloomberg L.P. that enables professionals in the financial services sector and other industries to access the financial markets.
The asset management company (AMC) has also come out with a statement in this regard.
It said: “Axis AMC has been conducting a suo moto investigation over the last two months(since February 2022). The AMC has used reputed external advisors to aid the investigation. As part of the process, two fund managers have been suspended pending investigation of potential irregularities. We take compliance with applicable legal/regulatory requirements seriously, and have zero tolerance towards any instance of non-compliance.”
Who Will Manage These Funds Now?
Ashish Naik will manage Axis Consumption ETF, Axis Banking ETF, Axis NIFTY ETF.
Ashish Naik, Devang Shah and Sachin Jain will be managing Axis Arbitrage Fund.
Ashish Naik and Hitesh Das will manage Axis Quant Fund.
Jinesh Gopani will manage Axis Technology ETF.
Jinesh Gopani and Hitesh Das will manage Axis Value Fund.
Why Were The Fund Managers Changed?
Sebi is investigating a case of serious violation called 'front running’ in the operations of Axis Mutual Fund. This is why Axis Mutual Fund had informed the board of Axis Bank that it has now removed the two said fund managers from managing any of its funds, pending further investigations.
What Is Front Running?
Front running is considered a serious offence, as people privy to investing knowledge of a mutual fund scheme buy or sell securities through their personal accounts ahead of the said mutual fund executing its trade transactions.
This is because mutual funds usually buy or sell in large quantities, and such a transaction causes the price of the respective security to go up or down, respectively. This is how front runners benefit from such practices.
What Is Being Alleged?
It is alleged that Viresh Joshi, head dealer and fund manager of five of the mutual fund schemes at Axis Mutual Fund, and Deepak Agarwal, equity research analyst and fund manager for three mutual fund schemes benefitted from this front running practice at Axis Mutual Fund, reported Livemint.
“Sebi detected the case of front running in the last two years. The preliminary investigation points to front running in as many as nine scripts and ill-gotten gains to the tune of ₹170 crore,” Livemint quoted an anonymous source as saying.