Description

SEBI settlement order against 14 entities for front-running trades of Marcellus group entities through misuse of non-public information by a dealer.

Summary

SEBI issued a settlement order against 14 applicants for front-running trades of Marcellus group entities (including Marcellus Investment Managers Private Limited PMS, Marcellus Rising Giants Fund AIF, and related FPIs). The scheme was orchestrated by Kushal Rajesh Sheth, a dealer at Marcellus Investment Managers who possessed non-public information about substantial impending orders, and executed primarily through his uncle Ashwin Somchand Sheth who placed or instructed trades in accounts of family members and connected entities. The applicants filed suo-motu settlement applications under SEBI Settlement Regulations 2018, proposing to settle without admitting or denying findings.

Key Points

  • 14 entities filed settlement applications for alleged front-running violations including Mr. Kushal Rajesh Sheth, Mr. Ashwin Somchand Sheth, family members, HUFs, and BW Traders
  • Settlement applications numbered 8298/2025 through 8315/2025 with corresponding settlement orders SO/PSD/2025-26/8298 through SO/PSD/2025-26/8315
  • Alleged violations of SEBI Act Sections 12A(a), (b), (c) and (e) and PFUTP Regulations 3(a), 3(b), 3(c), 3(d), 4(1) and 4(2)(q)
  • Kushal Rajesh Sheth was employed as dealer at Marcellus Investment Managers Private Limited with access to non-public order information
  • Information was transferred through multiple channels: phone calls, WhatsApp chat/calls/images, and physical meetings
  • Uncle Ashwin Somchand Sheth orchestrated the scheme by placing orders or instructing others using family/connected entity accounts
  • Information was also passed to Amit Mahida who placed front-running trades in his wife Krishna Amit Mahida’s account
  • Big Clients included Marcellus Investment Managers Private Limited (SEBI registered PMS), Marcellus Rising Giants Fund (SEBI registered AIF category 3), Dovetail Global Fund PCC – Marcellus India Fund (FPI), and Emory University – Marcellus Investment Managers Pvt Ltd. (FPI)

Regulatory Changes

No new regulatory changes introduced. This is an enforcement action under existing SEBI Act provisions and PFUTP Regulations.

Compliance Requirements

  • Entities must refrain from front-running activities and misuse of non-public trade information
  • Dealers and employees with access to client order information must maintain confidentiality and comply with insider trading and front-running prohibitions
  • Market intermediaries should implement robust controls to prevent misuse of non-public information by employees
  • Settlement applications filed under neither-admit-nor-deny framework per Settlement Regulations 2018

Important Dates

  • Settlement applications filed in 2025 (specific filing dates not mentioned in excerpt)
  • Settlement order numbers: SO/PSD/2025-26/8298 through SO/PSD/2025-26/8315

Impact Assessment

This enforcement action demonstrates SEBI’s continued vigilance against front-running activities, particularly involving misuse of privileged information by dealers and employees of registered intermediaries. The case involves a systematic scheme where non-public information about substantial orders of institutional clients (PMS, AIF, FPIs) was exploited for personal gain through family networks. The settlement route allows resolution without protracted litigation while serving as a deterrent. Market impact is specific to the entities involved, but reinforces the need for robust internal controls at investment management firms to prevent information leakage and front-running by employees with access to client order data.

Impact Justification

High severity enforcement action involving systematic front-running scheme by dealer and family members exploiting non-public trade information. Medium market impact as it affects specific entities rather than broad market participants.