MUMBAI: Busting a major 'front running' case in the stock market, Sebi today ordered impounding of unlawful gains worth nearly Rs 15 crore from brokerage firm Sharekhan and 15 other entities.
The order comes a day after French giant BNP Paribas announced acquisition of home-grown brokerage firm Sharekhan in an estimated Rs 2,000-crore deal.
Front running refers to an illegal practice in 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.
In an order passed late in the night, Sebi directed impounding of illegal gains of Rs 50.93 lakh from Sharekhan, while an amount totalling over Rs 14 crore would be impounded from 15 other entities, including individuals and companies.
The case refers to 'front running' in at least 29 shares including Idea Celluar, Suzlon Energy, Jet Airways, DLF, Cairn India, ICICI Bank, RCOM, Indian Hotels, HDFC Ltd, L&T, Unitech, Yes Bank, Videocon, JSW Steel and Hindalco.
The order follows a Sebi probe into suspected front- running by certain entities between March 2009 to March 2011.
The investigation revealed that the trades in the accounts of at least seven entities, collectively referred to as "front-runners" or 'clients of Sharekhan', were in the nature of front-running the orders and trades of the "Sterling Group" and that the subsequent orders placed by the front-runners matched almost completely with the orders placed by the Sterling Group.
These entities carried out their front-running activity predominantly through the stock broker, Sharekhan Limited, and their accounts at Sharekhan were handled by one Madhu Chanda, a branch and relationship manager.
The probe also revealed that the trades of Sharekhan and Madhu Chanda's husband Anandilal Chanda, among others, were ahead of trades of the seven clients of Sharekhan.
In a 42-page order, Sebi further said that one Manish Chaturvedi, an employee in the Sterling Group, was generally placing orders with the stock brokers on behalf of the Group.
He was found to have knowledge of investments and the impending buy or sell orders of the Group.
In its probe, Sebi also retrieved voice recordings from HSBC InvestDirect Securities India Limited and JM Financial Services Limited, pertaining to placement of certain orders in the accounts of the Sterling Group. Mobile call data records of the involved persons were also accessed during the probe.