Description

SEBI order against 30 noticees for alleged front running violations involving family trusts, with charges under SEBI Act Sections 12A and PFUTP Regulations.

Summary

SEBI has issued an order under Sections 11(1), 11(4), 11(4A), 11B(1), 11B(2) read with Sections 15HA and 15I of the SEBI Act, 1992 against 30 noticees for alleged front running of orders of a Big Client (certain family trusts). The proceedings commenced via Show Cause Notice dated January 24, 2024, alleging violations of Sections 12A(a), (b), (c) and (e) of SEBI Act and Regulations 3(a), (b), (c), (d), 4(1) and 4(2)(q) of the PFUTP Regulations, 2003. Six noticees (Noticees 1-5 and 25) have already settled the matter via settlement order dated December 19, 2024 under Settlement Regulations, 2018. The remaining 24 noticees include individuals, HUFs, and entities allegedly involved in the front running scheme.

Key Points

  • Total 30 noticees initially charged with front running violations
  • 6 noticees (Noticees 1-5 and 25) settled via December 19, 2024 settlement order
  • 24 noticees remain subject to this enforcement order
  • Violations alleged under SEBI Act Sections 12A(a), (b), (c), (e)
  • Violations alleged under PFUTP Regulations 3(a), (b), (c), (d), 4(1), 4(2)(q)
  • Case involves front running of Big Client orders (certain family trusts)
  • Angel One mentioned in connection with settlement proceedings
  • Order spans 82 pages with detailed findings and directions

Regulatory Changes

No regulatory changes introduced. This is an enforcement order applying existing provisions of SEBI Act, 1992 and PFUTP Regulations, 2003.

Compliance Requirements

  • Market participants must refrain from front running client orders
  • Entities must ensure compliance with prohibition against fraudulent and unfair trade practices
  • Brokers and intermediaries must maintain adequate surveillance to prevent misuse of client order information
  • Proper Chinese walls and information barriers must be maintained between different functions

Important Dates

  • January 24, 2024: Show Cause Notice issued to all 30 noticees
  • December 19, 2024: Settlement order for Noticees 1-5 and 25
  • October 24, 2025: Final order published

Impact Assessment

Market Impact: High - Front running cases undermine market integrity and investor confidence. This large-scale enforcement action involving 30 entities signals SEBI’s serious approach to detecting and penalizing manipulative trading practices.

Compliance Impact: High - Intermediaries, brokers, and traders must strengthen internal controls, surveillance mechanisms, and compliance frameworks to detect and prevent front running activities. The case emphasizes the need for robust information barriers.

Legal Impact: Settlement option utilized by 6 noticees demonstrates SEBI’s Settlement Regulations framework in action, while 24 noticees face full adjudication proceedings with potential penalties and market access restrictions.

Impact Justification

Major enforcement action involving 30 entities for front running violations under multiple SEBI Act sections and PFUTP Regulations, indicating serious market manipulation concerns