Mumbai: The Enforcement Directorate (ED) began searches on Monday morning at premises linked to Viresh Joshi, the former chief trader and fund manager of Axis Mutual Fund (MF). This is part of an investigation into an Axis Mutual Fund front-running case connected to alleged forex violations. The ED raid was ongoing at the time of going to the press.
Joshi was sacked in May, 2022 by the asset management company after allegations of front running and broker payments surfaced.
According to the Sources the financial probe agency has registered a FEMA case against Joshi. Front-running is a type of financial misconduct where a fund manager makes trades based on non-public information about upcoming orders. This illegal practice involves a broker or analyst using confidential information to acquire securities or enter into options or futures contracts for their own benefit. Such actions can provide certain traders with an unfair advantage and harm other investors.
In July 2022, the Mumbai investigation wing of the Income Tax Department conducted searches at over 25 locations in Mumbai, Ahmedabad, Vadodara, Bhuj, and Kolkata connected to Joshi. The department also questioned brokers and middlemen linked to the case. This action was based on information shared by SEBI.
Subsequently, the Income Tax Department attached Rs 57 crore in fixed deposits maintained by Joshi, claiming the funds were proceeds from illegal trades. SEBI, too, carried out search and seizure operations at various places across the country and seized electronic devices from the suspects.
The probe by Axis mutual fund found that Joshi would tell the broker about the shares Axis was about to buy in bulk. After the broker bought the stock, the fund house would buy the stock from the broker at a higher price. As part of the arrangement, Joshi received kickbacks from brokers.
These sources added that as mandated, the trade information wasn’t reflected on the stock exchanges. This allowed the people, in turn, to use such information for ‘illicit gains’ in the stock market by trading in such scrips either in their own account or accounts of their clients, a source explained.
