Sebi levies Rs 40 lakh penalty on four entities in Axis MF front-running case

In an order passed on Tuesday, the Securities and Exchange Board of India (Sebi) imposed a penalty of Rs 10 lakh each on Woodstock Broking and its director Suresh Kanmal Jajoo and Marfatia Stock Broking and its director Nishil Surendra Marfatia.

The order relates to a Sebi investigation with respect to trades executed by certain entities, which appeared to be in the nature of front-running of the trades of Axis Mutual Fund (Big Client), pursuant to certain alerts generated by the surveillance system.

The investigation period was from April 1, 2021 to March 31, 2022.

Sebi found that the two brokers facilitated the installation and operation of their ODIN trading terminals on a computer system used by Prijesh Kurani in Dubai, who was neither an authorised person nor a registered dealer of the brokers.

In the case of Woodstock Broking, Sebi relied on WhatsApp communications, technical evidence involving IP addresses and MAC IDs, and the role of its IT personnel in facilitating remote access through AnyDesk.

It also noted that Visa Capital Partners, whose trading account was used in the alleged scheme, had an account with Woodstock and that Jajoo was a partner in the firm.

In Marfatia's case, the market watchdog relied on a statement from its managing director, Nishil Marfatia; WhatsApp conversations involving its IT personnel; and common MAC IDs linking the trading systems used for transactions routed through the two brokers.

The regulator held that the brokers aided the execution of fraudulent trades by providing the necessary infrastructure and technical assistance, in violation of the Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) Rules.

The stock brokers and their directors have been directed to pay the penalty amount within 45 days of receiving the order.