Capital markets regulator Securities and Board of India (Sebi) has imposed penalties totalling Rs 15 lakh on six entities in a case pertaining to front-running the trades of Deutsche Mutual Fund, which is now known as DHFL Pramerica Mutual Fund.
Those penalised by Sebi are -- Kanchan Jena, Hemlata Dei Jena, Malati Lata Jena, Jayant Chhaparia, Abhishek Chhaparia and Progressive Share Brokers.
The regulator levied a fine of Rs 5 lakh on the Jena sisters and Chhaparias for violating Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) norm.
They have been directed to pay the fine within 45 days, according to two separate orders passed by Sebi on Friday.
For those not aware, front-running means dealing in stocks based on insider knowledge of a transaction that is not yet revealed to the public. This is considered one of the most serious offenses by the Sebi.
Sebi found that the Fund Manager (FM) of Deutsche Mutual Fund (DMF) and his parents had employed a scheme to 'front run' the orders of the DMF and also were involved in every step that led to the fruition of the scheme, from the beginning till the withdrawal of the wrongful gain of the front running trades.
However, during the investigation period from September 2014 and May 2015 the three sisters -Kanchan Jena, Malati Lata Jena and Hemlata Dei Jena-, Jayant Chhaparia and Abhishek Chhaparia facilitated them in executing the front-running trades.
The watchdog also noted that the Progressive Share Brokers had not acted with due skill, care and diligence while opening the trading account of Malati Lata Jena. This lack in diligence enabled the manipulators to carry out the trading activities by masking their identity. This is why the watchdog levied a Rs 5 lakh on Progressive Share Brokers for disregarding stock brokers rule.
In December 2021, FM and his parents settled the case with Sebi by paying a fine of nearly Rs 5 crore.