SEBI’s Biggest Front-Running Action: 12 Banned, ₹90 Lakh Fine.

SEBI Front-Running Case: Regulator Bars 12 Entities for Five Years, Imposes ₹90 Lakh Penalty

SEBI has taken strong action in a major front-running case, barring 12 entities from the securities market for five years. The regulator imposed penalties totaling ₹90 lakh and ordered disgorgement of over ₹1.07 crore in illegal gains. The investigation found misuse of confidential client trading information and coordinated advance trades that distorted market fairness, reinforcing SEBI’s zero-tolerance approach to market manipulation.

SEBI front-running case enforcement has intensified after the capital markets regulator barred twelve entities from securities markets for five years, signalling a strong stance against misuse of non-public trading information.

In its final order issued on Friday, the Securities and Exchange Board of India imposed cumulative penalties of ₹90 lakh and ordered disgorgement of illegal gains exceeding ₹1.07 crore.

The regulatory action follows a detailed investigation into alleged front-running of large trades executed on behalf of a prominent client within the Indian equity markets ecosystem.

According to the order, SEBI concluded that confidential trading information was systematically leaked, misused, and monetised through synchronised trading strategies across connected entities.

The regulator emphasised that such practices distort market integrity, undermine investor confidence, and violate the fundamental principles of fairness governing India’s capital markets framework.

Front-Running Investigation Involving Mangal Keshav Financial Services

The case centres on trades executed for Paresh N Bhagat, Chairman and Managing Director of Mangal Keshav Financial Services LLP, a registered market intermediary.

SEBI’s investigation found that two dealers employed at MKFS had access to substantial impending client orders with the potential to significantly influence market prices.

Dealers Ashish S. Parekh and Rajesh Joshi allegedly acted as “information carriers,” abusing their fiduciary positions to pass on non-public information to external beneficiaries.

This sensitive information allegedly included order size, timing, and trading direction, enabling recipients to place advance trades before execution of bulk client orders.

The regulator noted that these actions breached trust reposed in licensed market professionals and violated explicit prohibitions under securities fraud regulations.

Coordinated Trading Patterns and Network of Connected Entities

SEBI’s order highlighted the use of synchronised trading patterns such as Buy-Buy-Sell and Sell-Sell-Buy strategies to capitalise on predictable price movements.

These trades were allegedly executed moments before the large client orders, ensuring assured profits once the market reacted to bulk transactions.

The front-running network reportedly included family members, associates, and Hindu Undivided Family accounts, creating layered ownership structures to obscure beneficial interests.

Investigators identified repeated transactional links and consistent profit-making behaviour, strengthening the regulator’s conclusion of coordinated and premeditated market abuse.

SEBI observed that such patterns could not be attributed to coincidence or legitimate trading strategy, given their frequency, timing, and interconnected execution.

Penalties, Disgorgement Orders, and Legal Findings

Whole-time Member Kamlesh C. Varshney, in the order, stated that the noticees utilised information unavailable to the general public for personal benefit.

He concluded that the conduct amounted to fraud under the SEBI Act, warranting strict penalties to deter similar misconduct within regulated market institutions.

Under Section 15HA, SEBI imposed ₹15 lakh penalties on primary dealers Ashish Parekh and Rajesh Joshi for their central role in the scheme.

Nagendra S. Dubey and Chirag Atul Pithadia, identified as facilitators and conduits, were fined ₹10 lakh each for enabling execution of front-running trades.

Eight other connected entities, including Dipa Ashish Parekh, Kashmira Joshi, and related HUF accounts, were penalised ₹5 lakh each.

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Market Ban Timelines and Exceptional Proceedings

In addition to monetary penalties, SEBI ordered disgorgement of ₹1,07,61,609 in unlawful gains, along with 12 percent annual interest from the profit realisation dates.

The regulator permitted adjustment using approximately ₹1.25 crore already impounded in escrow accounts under a prior interim enforcement order.

Ten entities, including Ashish Parekh and Nagendra Dubey, remain barred from markets for five years starting December 26, 2022, the interim order date.

Two noticees, Kashmira Joshi and Rajesh Joshi, face a fresh five-year debarment effective from issuance of the final order.

Proceedings against Sushma Nagendra Dubey were abated following her death, though SEBI transferred disgorgement liability to her legal heirs.

Regulatory Signal for Market Integrity

Market experts view the order as a clear warning that front-running, information leakage, and collusive trading will attract stringent regulatory consequences.

SEBI’s action reinforces surveillance-driven enforcement and underlines the regulator’s focus on protecting retail investors and institutional market integrity.

The order is expected to influence compliance frameworks across brokerage houses, particularly around information barriers, dealer supervision, and audit accountability.