The market regulator stated that it detected Rs 30.5 crore in unjust gains as a result of the suspected front-running actions and ordered that the sum be seized from the firms.
On February 28, the Securities and Exchange Board of India (SEBI) said that it had blacklisted 20 additional individuals in a front-running case connected to the fund company, including Viresh Joshi, the former head trader of Axis Mutual Fund.
The market regulator said that it had determined that Rs 30.5 crore was the amount that had been improperly gained as a result of the suspected front-running actions and ordered that the businesses hold the money in trust.
The regulator said in the ruling that “Viresh Joshi, the then-chief dealer of Axis MF, was found to have traded in several stocks in advance of the approaching orders submitted on behalf of the significant customer (Axis Mutual Fund).”
In addition, SEBI said that Joshi concocted a “fraudulent plan” to front run transactions of Axis MF in “collusion” with other “unscrupulous companies.”
In its ruling, SEBI stated that Joshi, who served as the chief dealer, had the authority to choose the timing of Axis MF’s orders. From the trading accounts of the businesses and people who were indirectly related to Joshi, further front-running trades were made. During the Covid-19 outbreak, work-from-home arrangements were common in many organisations and fund houses, and SEBI found throughout its probe that Joshi had misused them.
According to internal communications at the fund house, SEBI discovered that Axis AMC had placed Bloomberg trading terminals in the laptops of all of its dealers, allowing them to route their orders (for securities to be purchased and sold on behalf of the fund company) from their homes. To maintain isolation, Joshi used to alternate between working from home and his own private dealing room set up at the workplace.
Not only that, but SEBI discovered Joshi had additional mobile phones that he had not reported to the fund firm. This violates SEBI norms since dealers and fund managers are not permitted to use personal cell phones during trading hours. They can only utilise recorded phone lines, which may include a mobile phone that records calls.
Front running is a market activity in which stocks are traded ahead of substantial client orders for personal gain. Between September 2021 and March 31, 2022, SEBI conducted an investigation into the Axis MF matter.
SEBI did not penalise or summon any other senior personnel at the fund firm in its decision. Nevertheless, it states that there are concurrent and separate procedures at SEBI that are “at various levels of inquiry involving other businesses.” According to SEBI, the current order is just concerning the front running of Axis MF trades.
