SEBI has issued a Final Order (WTM/AS/ISD/ISD-SEC-6/32384/2026-27) against eight noticees for front-running the trades of Unifi Capital Pvt. Ltd., a Portfolio Management Services (PMS) provider, during the investigation period of April 1, 2021 to May 31, 2022. Ashok Maheshwari, a dealer at Kotak Securities Limited (through which 47.28% of Unifi’s gross traded value was executed), allegedly leaked advance information about Unifi’s upcoming trades to associates who then traded ahead of those orders to generate unlawful profits. The order is passed under Sections 11(1), 11(4), 11(4A), 11B(1) and 11B(2) of the SEBI Act, 1992.

Key Points

• 8 noticees named: Ashok Maheshwari (dealer, Kotak Securities), Darshan Bakul Shah, Khusboo Darshan Shah, Darshan Bakul Shah (HUF), Benzer Department Stores Pvt. Ltd., Mihir Dhirajalal Savla, CHL Stock Concepts Pvt. Ltd., and Chirag Mahendra Shah
• Ashok Maheshwari was responsible for placing trading orders for Unifi Capital (the “Big Client”) at Kotak Securities Limited
• Monthly gross traded value (GTV) of Noticees 2, 3 and 4 increased 4.3 times during the investigation period compared to the six months prior
• 27.01% of scrip days of Noticees 2, 3 and 4 were common with the Big Client; for intraday trading, 56.31% of scrip days were common
• 80.52% of intraday profits of Noticees 2, 3 and 4 were made on scrip days common with the Big Client
• Call detail records (CDR) were used as evidence to establish communication links between the noticees
• Violations include Sections 11C(3) and 12A(a), (b), (c), (e) of the SEBI Act and Regulations 3(a), (b), (c), (d), 4(1) and 4(2)(q) of the PFUTP Regulations, 2003
• An Interim Order-cum-Show Cause Notice was first issued on April 26, 2024; this Final Order concludes that proceeding

Regulatory Changes

No new regulatory framework changes are introduced. This order applies existing provisions under the SEBI Act, 1992 and the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (PFUTP Regulations) to a front-running enforcement action.

Compliance Requirements

• Market intermediaries, particularly broker-dealers with access to large client order flows, must maintain strict information barriers to prevent misuse of client trading data
• Dealers handling institutional or PMS client orders must not communicate non-public order information to any third party
• Entities found to have front-run client trades are subject to disgorgement of unlawful gains, monetary penalties, and potential debarment from securities markets under Sections 11(4) and 11B of the SEBI Act
• PMS providers and brokers should review surveillance mechanisms to detect abnormal trading patterns correlated with their own order flow

Important Dates

• April 1, 2021 – May 31, 2022: Investigation period for alleged front-running activity
• April 26, 2024: Interim Order-cum-Show Cause Notice issued by SEBI
• April 2026: Final Order issued concluding enforcement proceedings

Impact Assessment

This enforcement action carries significant market integrity implications. The case demonstrates SEBI’s use of statistical correlation analysis (scrip-day overlap, intraday profit patterns) combined with call detail records to establish front-running by a broker dealer and connected entities. The 4.3x surge in trading volumes and 80.52% overlap of intraday profits with the PMS client’s trades constitute strong circumstantial evidence of systematic information misuse. The order reinforces SEBI’s zero-tolerance stance on front-running and signals continued scrutiny of dealer conduct at brokerages handling large institutional flows. Kotak Securities Limited (named as ABC Securities in the Interim Order) faces reputational exposure as the brokerage through which the scheme allegedly operated.