Axis MF front-running case: Sebi bars former MF dealer Viresh Joshi for 7 years, imposes ₹3 crore penalty

The Securities and Exchange Board of India (Sebi) on Friday barred Viresh Joshi, former chief dealer at Axis Mutual Fund, from accessing the securities market for seven years and imposed a ₹3 crore monetary penalty for his alleged involvement in a front-running case.

In its final order, the capital markets regulator also penalised 20 other individuals linked to the matter. They have been barred from the securities market for periods ranging from three to seven years, while monetary penalties imposed on them range from ₹10 lakh to ₹1 crore, depending on their role in the alleged violations.

The action follows an interim order-cum-show cause notice issued by Sebi in February 2023, after an investigation into suspected front-running activities involving trades executed on behalf of Axis Mutual Fund.

MUST READ: Sebi plans massive overhaul of portfolio manager rules. Here are the proposed changes

According to the regulator, the alleged front-running transactions took place between September 1, 2021, and March 31, 2022. Sebi had earlier estimated that the accused collectively made wrongful gains of around ₹30.55 crore, which were subsequently impounded through the interim order.

Front-running is an illegal market practice in which a person trades in securities based on advance knowledge of large institutional orders, enabling them to profit from the expected price movement once those orders are executed.

In the final order, Sebi clarified that the period during which the individuals have already remained barred from the securities market under the interim directions will be adjusted against the duration of the debarment imposed now. This means the restraint period already undergone since the February 2023 interim order will be counted while calculating the remaining ban.

MUST READ: SEBI allows SWP, STP standing instructions for mutual fund units held in demat accounts

In its 146-page final order, Sebi held that Joshi, who served as Chief Dealer at Axis Mutual Fund, had access to confidential information relating to the fund house's impending trades in his official capacity. According to the regulator, he passed this non-public information to Dubai-based Prijesh Kurani, who allegedly executed front-running trades through multiple trading accounts held by family members, associates and other entities before Axis Mutual Fund's orders were placed in the market.

Sebi said the alleged trades followed a consistent pattern, with positions being built immediately before the mutual fund's large transactions and squared off after the institutional orders influenced stock prices. The regulator noted that these transactions followed Buy-Buy-Sell (BBS) and Sell-Sell-Buy (SSB) patterns, enabling the entities to allegedly earn unlawful profits.

MUST READ: NSE gets SEBI nod to launch derivatives on Nifty India FPI 150 Index from August 12

The regulator observed that the scheme relied on a network of intermediaries. Besides Joshi and Kurani, Sebi found that Sumit Desai, Pranav Vora and Vaibhav Pandya allegedly facilitated the operation by arranging trading accounts and coordinating communications between the parties. According to the order, the alleged illegal gains amounted to ₹30.55 crore, of which Visa Capital Partners accounted for the largest share at over ₹14 crore.

During the proceedings, the noticees denied the allegations, arguing that there was no direct evidence linking Joshi to the sharing of confidential information. They also challenged the reliance on WhatsApp chats, call detail records and witness statements, alleging procedural lapses and violations of natural justice. Sebi, however, rejected these submissions and concluded that the evidence, viewed collectively, established the front-running scheme on the standard of preponderance of probabilities.