Sebi Takes Action In Front-Running Case, Bans 8 Entities And Impounds Rs 4.8 Crore

The Securities and Exchange Board of India (Sebi) has banned eight entities from the securities market and impounded illegal gains of Rs 4.82 crore, on January 27, 2025, following an investigation into alleged front-running activities.

Front-running is an illegal practice where a trader or entity uses non-public, insider information about an upcoming large transaction to make a trade before the information becomes public, profiting from the price movement caused by that transaction.

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As stated by PTI, this action followed Sebi’s investigation into the front-running of trades by Gagandeep Consultancy Private Limited, a major client, by certain entities. The investigation focused on potential violations of the Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) regulations, covering the period from September 2018 to September 2023.

In its interim order, Sebi identified Ashish Kirti Kothari, along with his family members and his Hindu Undivided Family (HUF), as being involved in the front-running of the client’s trades.

The investigation found that the client’s orders were placed through stockbroker Nirav Mahendra Sapani, who worked as a dealer at Anvil Share & Stock Broking Pvt Ltd. Sapani allegedly provided inside information about the client’s trades to Kothari and his associates, who then executed the front-running transactions using accounts controlled by Krishna Tukaram Kadam.

Sapani, who facilitated the trades, was one of the persons who participated in the gains from these transactions.

These eight organisations are prohibited from purchasing, selling, or dealing in securities until additional orders are issued as a result of the Sebi action, which identifies numerous infractions of the Sebi Act. Also, Sebi has impounded the illegal gains of Rs 4.82 crore earned from the front-running activities.

The Sebi's decision demonstrates the regulator's continuous efforts to fight market misbehaviour and promote fair procedures in the securities market.