SEBI Penalises Three Individuals ₹5 Lakh Each For Non-Cooperation In Rajesh Exports Front-Running Probe

The Securities and Exchange Board of India (SEBI) has fined three individuals Rs. 5 lakh each for not cooperating with an investigation into suspected front-running in the shares of Rajesh Exports Ltd.

The regulator found that they failed to share information and, in some instances, gave incorrect responses during the probe.

The order, passed by Adjudicating Officer Amit Kapoor, notes that Navnit Gadoya, Chiranggi Irish Shah and Surbhi Aggarwal were given multiple chances to respond but did not engage with the investigation. Their lack of response and incomplete disclosures, the order says, slowed down the process and made it harder for SEBI to piece together the facts.

The case stems from SEBI's examination of trading activity in Rajesh Exports Ltd between January 1, 2023 and October 31, 2023. During this period, the regulator flagged 38 instances where trades were suspected to have been placed ahead of large client orders.

The probe examined 38 alleged instances where the individuals were suspected of placing trades ahead of large client orders.

SEBI found that the three were connected through frequent call records, bank transactions and identical MAC ID/IP addresses. They traded through a common broker using internet-based trading facilities.

The order noted that Gadoya failed to respond to multiple summons for over nine months and submitted a delayed response only after the investigation had concluded. The delay was held to be unreasonable.

Shah initially denied any relationship with the other two. However, SEBI found this to be incorrect based on financial and communication records. She failed to respond to further queries despite being given opportunities.

Aggarwal similarly denied any relationship with the others and later submitted only a vague reply. SEBI found that she shared a common directorship at Weiz Mann Securities Pvt Ltd with them, along with other links.

SEBI clarified that the present proceedings were limited to the failure to cooperate with the investigation. It found that all three either failed to respond to summons or provided incorrect or incomplete information, which hampered the regulator's ability to establish links between them and large clients.

The order stated, “Had the Noticees complied with the summons and provided the factual information at the appropriate time, SEBI would have been in a better position to investigate the matter. As the Noticees did not provide the requisite information and either did not respond to the summons or provided incorrect information, their defiant conduct has certainly thwarted the attempt by SEBI to gather further evidence for a timely conclusion of the investigation proceedings.”

The regulator held that such conduct violated Section 11C(3) of the SEBI Act, which requires persons to furnish information during investigations. It ruled that they were liable for penalty under Section 15A(a) of the Act.

The order noted that no quantifiable disproportionate gain or investor loss could be established from the failure to cooperate. It also recorded that the individuals had not been penalised earlier under the provision.

Accordingly, SEBI imposed a penalty of Rs 5 lakh each on the three individuals and directed them to pay the amount within 45 days, failing which recovery proceedings may be initiated.