Sebi Fines 8 Entities Rs 1.50 Crore For Front-Running Trades

The Securities and Exchange Board of India (Sebi), has imposed a cumulative penalty of Rs 1.50 crore on eight entities for engaging in front-running trades using privileged and non-public information. The action follows an investigation into suspicious trading activity linked to a portfolio management services (PMS) client. Front-running is an illegal practice where traders use advance knowledge of large impending orders to place their own trades beforehand, thereby profiting from the expected price movement once the original transaction is executed. Sebi found that the entities had access to confidential trading information and used it to execute trades before placing the client’s orders.

According to the order of the market regulator released on April 27, 2026, the entities collectively made unlawful gains through this strategy. Sebi has now directed them to pay a fine on unlawful gains amounting to approximately Rs 1.29 crore, along with interest at an annual rate of 12 per cent. The recovered amount will be credited to the Investor Protection and Education Fund (IPEF), which is aimed at safeguarding investor interests and promoting financial awareness.

Sebi found in its investigation that Ashok Maheshwari had access to privileged trading information of the ‘Big Client’ and had shared the details of the large order from the client with Darshan Bakul Shah, who then acted on this information and executed trades in his own account. Additionally, Shah also used the information to process front-running trades in the accounts of his wife, Khushboo Darshan Shah, and a Hindu Undivided Family (HUF) entity. Shah also extended the profit-sharing scheme to Benzer Department Stores, CHL Stock Concepts, and other related entities.

The investigation revealed a clear pattern in the trading behaviour of the accused parties. They consistently placed buy or sell orders prior to the execution of large trades by the PMS client. Once the client’s orders influenced stock prices, the entities squared off their positions, thereby locking in profits. This pattern demonstrated the misuse of privileged information and a violation of fair market practices.

Sebi said that such activities undermine market integrity and erode investor confidence. By acting on unpublished price-sensitive information, the entities breached regulatory norms designed to ensure a level playing field for all market participants.

In addition to monetary penalties and disgorgement, Sebi’s order also serves as a warning to market intermediaries and traders about the consequences of engaging in fraudulent and manipulative practices. The regulator has been tightening surveillance and enforcement actions in recent years to curb insider trading and front-running activities.