The Securities and Exchange Board of India (SEBI) has issued an interim order on January 2, 2025, targeting an intricate front-running scheme involving 22 entities, including Rohit Salgaocar, a Singapore-based trader, and Ketan Parekh, a former stock market operator with a controversial past. The investigation revealed a sophisticated modus operandi aimed at exploiting non-public information (NPI) of a US-based fund managing $2.5 trillion globally.
Key Findings from the SEBI Investigation:
- Modus Operandi: Rohit Salgaocar allegedly accessed NPI from the fund’s impending trades and passed it to Ketan Parekh. Parekh utilized his network, primarily based in Kolkata, to execute trades that benefited from the fund’s transactions.
- Trading Networks: The operation involved leveraging multiple entities, including stockbroking firms and private companies, to execute these trades covertly. Communication was facilitated via encrypted platforms like WhatsApp and using pseudonyms.
- Financial Gains: The illegal activity spanned over two and a half years, generating wrongful gains estimated at ₹66 crore, which SEBI has ordered to be impounded.
Unique Elements of the Scheme:
- Unlike traditional front-running, this case involved the orchestrators staying outside the direct regulatory ambit. Ketan Parekh, previously banned by SEBI, reportedly used proxy entities and frequently changed contact details to evade detection.
- SEBI’s innovative alert systems identified the scheme, marking a significant advancement in regulatory oversight.
Actions Taken:
- Debarment of all involved entities from the securities market.
- Impounding of ₹66 crore as wrongful gains.
- Further investigations to consolidate findings, including issuing new show-cause notices.
