Fidelity front running case: Sebi slaps over Rs 4.28 cr penalties, securities mkt ban on 11 entities

New Delhi, Sebi on Friday slapped penalties worth more than Rs 4.28 crore on 11 entities for front running trades of 21 Fidelity Group entities besides barring them from the securities market for varying periods. While one individual — Vaibhav Dhadda — has been restrained from the securities market for three years, the ban on the remaining 10 entities is for a period of two years.

The regulator had passed an interim order in the matter in June 2021. It had conducted an investigation to check whether there had been front running in the trades of various funds of Fidelity Group during the period from February 1, 2019, to November 30, 2019.

In a 121-page final order passed on Friday, Sebi said all the noticees (the 11 entities) were front running the trades of the 21 Fidelity Group entities, based on non-public information of such impending trades available with Vaibhav Dhadda who was a trader for the Fidelity Group entities.

“I also note that Vaibhav Dhadda was also placing the orders in the trading accounts of Alka Dhadda, Arushi Dhadda and Pramod Jain (HUF) and some trades in the account of Sumit Kanungo and Beena Jain. Further, the profits of the trades from the trading account of Sumit Kanungo were shared with Vaibhav Dhadda… Further, there were fund transactions between Vaibhav Dhadda and Aditya Barla,” Sebi Whole Time Member Ananta Barua said in the order.

He also noted that Vaibhav Dhadda is a central figure in the front running activity by having access to information about the impending trades of the Fidelity Group entities by virtue of his position as a trader with the Fidelity Group entities.

Penalties totalling Rs 4,28,40,000 have been imposed on the 11 entities.

Vaibhav Dhadda has been barred from the securities market as well as restrained from being associated with the securities market as a director or a KMP or trader in any intermediary or Market Infrastructure Institution, for three years.

Other noticees — Alka Dhadda, Arushi Dhadda, Pramod Jain- HUF, Beena Jain, Aditya Barla, Sumit Kanungo, Prashant Jain, Pranay Vaid, Siddharth Jain and Riya Jain Kanungo — have been restrained from the securities market for two years.

Besides, as many as 6 noticees have been directed to disgorge the respective amounts along with an interest at the rate of 12 per cent per annum. They are Vaibhav Dhadda, Alka Dhadda, Arushi Dhadda, Aditya Barla, Sumit Kanungo and Riya Jain.

According to Sebi, in case the noticees concerned fail to comply with the direction of disgorgement of money, they would be restrained from accessing the securities market till the actual payment of disgorgement amount or till the completion of the debarment, whichever is later.

The regulator noted that the default by the noticees is not of repetitive nature as they have not been penalised for violation of securities laws earlier and the unlawful gains made by the noticees have been impounded/ are being directed to be disgorged and the finding of investigation do not identify any investor or group of investors who have suffered any loss from such default.

“The noticees have also claimed that they have also suffered due to loss of employment and also due to the interim debarment, which is still operating against some noticees,” the order said.

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