Sebi pays Rs 2.8 cr to resolve allegations of frontrunning Aditya Birla MF's transactions and imposes a six-month voluntary debarment

Sebi pays Rs 2.8 cr to resolve allegations of frontrunning Aditya Birla MF's transactions and imposes a six-month voluntary debarment

Maxgrow Fintrade, its director Bhavin Pankaj Doshi, Nitesh Kumar Jain, and Atish Shah were the applicants who requested payment, in that order, of about Rs 96.08 lakh, Rs 68.9 lakh, Rs 68.9 lakh, and Rs 62.4 lakh.

On May 18, 2023, the four parties filed an application for a settlement.

After looking into possible front-running of transactions by Aditya Birla Mutual Fund, the market regulator approved a settlement for little more than Rs 2.8 crore for the involved parties.

Maxgrow Fintrade, its director Bhavin Pankaj Doshi, Nitesh Kumar Jain, and Atish Shah were the applicants who requested payment, in that order, of about Rs 96.08 lakh, Rs 68.9 lakh, Rs 68.9 lakh, and Rs 62.4 lakh.

The businesses have also been required to pay, jointly and severally, around Rs 85.11 lakh towards disgorgement of alleged illicit gain (which includes simple interest of 12 percent per year), according to the settlement decision announced by the Securities and Exchange Board of India (Sebi) on April 26. Additionally, each of the four firms has consented to a voluntary six-month suspension from the securities market.

Regarding the possible front-running of transactions by Aditya Birla Mutual Fund Bhavin Pankaj Doshi and Maxgrow Fintrade Pvt., the market regulator had received a warning. Concerning the possible front running of ABMF transactions between February 1, 2021, and December 31, 2021, the regulator opened an inquiry.

A show cause notice (SCN), dated April 11, 2023, was issued to the applicants in accordance with the investigation's conclusions.

Following an analysis of trade and order logs, phone data records, sworn affidavits, and other supporting documentation, the SCN among other things claimed the following:

1. It was alleged that the trades made by Pankaj Doshi and Maxgrow Fintrade Pvt. Ltd. during the investigation period were not made in the regular course of business and were instead likely made with the intention of front running the Big Client's (the mutual fund house) trades.

2. In contravention of several provisions of the Securities and Exchange Board of India Act, 1992, as well as the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (PFUTP Regulations), Doshi and his company front run the mutual fund house's trades.

3. Atish Shah served as the information carrier and Nitesh Kumar Jain as the tipper.

On May 18, 2023, the four parties filed an application for a settlement. Sebi's panel of full-time members reviewed the committee's recommendation and recommended a set of conditions of settlement after the regulator's internal committee and the highly-powered advisory committee (HPAC) deliberated and determined the settlement terms.

On November 10, 2023, the internal committee convened once again and requested that the applicant present their updated settlement conditions. On November 24, 2023, the applicants turned in the updated terms.