Sebi fines former Axis MF chief dealer, aides in ₹30.56 crore front-running case

The Securities and Exchange Board of India (Sebi) has imposed penalties worth ₹7.4 crores and market bans on former Axis Mutual Fund chief dealer Viresh Joshi and several others after concluding that they were part of a front-running scheme that illegally profited from confidential information about the fund house's trades.

India's markets regulator has wrapped up one of the biggest front-running investigations involving a mutual fund, holding that Joshi leaked confidential details of the fund's upcoming trades to an external trader who then placed trades ahead of the fund and booked profits.

The final order follows an investigation into trades between September 2021 and March 2022 after Sebi's surveillance system flagged suspicious trading patterns linked to Axis Mutual Fund's market transactions.

Front-running is an illegal practice in which a person with access to confidential information about a large investor's upcoming trades uses that information to trade before the large order hits the market. Since big institutional orders often move stock prices, buying or selling ahead of them allows the trader to profit once the larger order is executed.

According to Sebi, Joshi had access to details such as the stock, quantity and timing of Axis Mutual Fund's proposed trades because of his role as chief dealer. The regulator alleged that he passed this non-public information to Dubai-based trader Prijesh Kurani, who then executed trades through several accounts before Axis Mutual Fund's orders reached the market.

The regulator also held that Sumit Desai, Pranav Vora and Vaibhav Pandya helped the scheme by arranging trading accounts that were used to execute the trades and by introducing Joshi to Kurani. Sebi said Kurani used multiple accounts belonging to relatives, and other entities to place the trades.

Sebi's investigation pieced together the alleged scheme using statements recorded during the probe, a whistleblower complaint, analysis of call detail records, WhatsApp chats and other digital evidence. The regulator said these showed communication between the key individuals and helped establish how confidential trade information was allegedly passed and acted upon.

The regulator said Kurani placed orders shortly before Axis Mutual Fund's own trades and exited the positions before the fund completed its buying or selling. Sebi said this pattern was repeated across several trades and typically followed what it described as Buy-Buy-Sell or Sell-Sell-Buy sequences. In simple terms, the front-running accounts first took positions, the mutual fund's large orders then moved prices in the expected direction, and the positions were quickly squared off for a profit.

According to Sebi, the trades generated unlawful gains of ₹30.56 crore across nine trading accounts. The biggest share of the alleged profits came through Visa Capital Partners.

“In the present matter, however, the conduct of Mr. Viresh, the information carrier is even more serious. The illegal gains made through the front running is substantially higher than those seen in comparable cases. Further, the Big Client as at March 31, 2022 had approximately 1.28 crores investor accounts. The illegal gains involved along with the large investor base, reflects the scale of the market abuse,” the regulator said in the order.

Apoorva is a Mumbai-based journalist at Mint who covers the Securities and Exchange Board of India (SEBI), tracking the pulse of India’s capital markets, regulatory developments and the people who operate within them. She holds a postgraduate diploma in business and financial journalism from the Asian College of Journalism, where she developed a strong foundation in markets, companies, and economic policy. She began her journalism journey with an internship at Bloomberg, where she worked across beats such as real estate, infrastructure, capital markets, and deals, which helped her understanding of business and finance.<br><br>She is guided by the b...