SEBI Debars Former Axis Mutual Fund Dealer, 15 Others In Front-Running Case; Orders ₹30.55 Crore Disgorgement

The Securities and Exchange Board of India (SEBI) has restrained former Axis Mutual Fund Chief Dealer Viresh Joshi and 15 other individuals and entities from the securities market after finding them guilty of orchestrating a front-running scheme involving the mutual fund's trades.

Holding that the scheme "directly compromised market integrity and distorted the price discovery mechanism for ordinary investors," the regulator imposed penalties totalling ₹7.40 crore and directed disgorgement of ₹30.55 crore, along with interest at 12% per annum.

SEBI found that Joshi abused his position as Chief Dealer by leaking non-public information about Axis Mutual Fund's impending trades to Dubai-based trader Prijesh Kurani.

Kurani executed trades through a network of conduit accounts ahead of the fund's orders, generating unlawful gains. According to the order, Sumit Desai arranged trading accounts used in the scheme, Pranav Vora facilitated access to brokerage terminals, and Vaibhav Pandya acted as an intermediary between Joshi and Kurani.

The regulator found that the conduit accounts repeatedly placed trades immediately before Axis Mutual Fund entered the market and exited their positions before the fund completed its trades.

The transactions followed a Buy-Buy-Sell or Sell-Sell-Buy pattern to profit from the price movement created by the fund's large orders. Rejecting the defence that the trading pattern was coincidental, SEBI observed:

"The recurrence of the same combination across multiple instances cannot be reasonably dismissed as typical coincidence. Further, I also note that Noticee 12 has not placed before me an order-placement rationale which would substantiate his defense."

SEBI also rejected Kurani's claim that the trades were based on independent research. It noted that he admitted operating the nine demat accounts used in the scheme but failed to produce any material supporting that defence.

The regulator further observed that the scheme necessarily involved the leakage of non-public trading information, to which Joshi had access as Chief Dealer.

Concluding that Joshi and Kurani orchestrated the scheme, SEBI said Kurani executed the trades through a network of mule accounts with the help of intermediaries and specialised brokerage terminals.

Joshi, Kurani, and five others were restrained from accessing the securities market for seven years. Sumit Desai and Pranav Vora were restrained for five years, while Vaibhav Pandya and the remaining noticees were restrained for three years. The regulator also imposed penalties aggregating ₹7.40 crore, including ₹3 crore on Joshi and ₹1 crore on Kurani.