Capital market regulator Securities and Exchange Board of India (SEBI) has barred Viresh Joshi, former chief dealer of Axis Mutual Fund, and 20 other entities in a case of alleged front-running at Axis Mutual Fund until further orders.
After launching an internal probe into the allegations of irregularities, Axis Asset Management Company (AMC) sacked Viresh Joshi with effect on May 18, 2022.
The regulator said these entities collectively earned ₹30.5 crore as "wrongful gains" via front-running activities, which it directed to be impounded. The SEBI order says the noticees must deposit the said amount of "wrongful gains" in 15 days. Notably, the regulator has not issued any order against the fund house so its operations will not be impacted by the orders.
The persons or entities that have been barred are Viresh Joshi, Sumit Desai, Pranav Vora, Vaibhav Pandya, Prijesh Kurani, Dharini Kurani, Rekha Kurani, Bharti Navnit Godya, MKB Bespoke Audio General, Bindesh Kurani, Nishil Surendra Marfatia, Olga Trading, Krunal Khamar, Kamlesh Arjundas Dhanrajani, Bhavin Shah, Rupal Bhavin Shah, Visa Capital Partners, Suresh K Jajoo, Vimla S Jajoo, Vimla S Jajoo, Ankit Jajoo, and Sheepra Sumeet Kabra.
Axis Asset Management Company Ltd manages investment portfolios of the schemes launched by Axis MF. As on March 31, 2022, the AMC had around ₹2.52 lakh crore of total assets under management.
During the course of the investigation, it was noted the noticees connected to Viresh Joshi were observed to have traded in different securities ahead of the impending orders placed on behalf of the Big Client (Axis Mutual Fund), the SEBI order said.
The findings say it was the dealer of the Big Client (Axis Mutual Fund) who had the discretion to decide as to when the orders would be placed. "This when coupled with the fact that the prima facie front running trades were executed from the trading accounts of the conduit noticees who are found to be indirectly connected to the dealer Viresh Joshi."
Joshi was privy to the orders or trade information of the Big Client i.e., when and what size of orders for buy or sell in a particular scrip would be placed on behalf of the Big Client, and which was not available in the public domain. "It was Viresh Joshi who would have passed on or leaked the confidential non-public information regarding the impending trade orders of the Big Client to individuals other than for whom it was intended for i.e., other than the empanelled stock brokers of Axis MF."
Viresh Joshi, in his deposition, admitted he negotiated deals for the connected noticees, said SEBI. As a dealer, he decided when to place the orders of the Big Client on the exchange platform. "Timing of placement of orders of the Big client was in the hands of Viresh Joshi, thereby giving him opportunity/latitude to work around the impending orders of the Big Client."
The SEBI order said the private or isolated work environment made available to Joshi due to the Covid-19 situation resulted in the absence of any immediate physical supervision over him while he performed the job of a dealer of Axis MF. It gave him an opportunity to work around his official duties.
The Axis AMC probe had started after complaints by some brokers against Joshi, which said he allegedly received kickbacks from some brokers for executing trades way higher than the market and sharing confidential information. The probe was conducted in front running in trades of Axis MF between September 2021 and March 31, 2022. The dealer was also accused of a flashy lifestyle, including owning sports luxury cars and several real-estate properties.
