The Enforcement Directorate (ED) has launched a case under the Foreign Exchange Management Act (FEMA) against Viresh Joshi, the former fund manager at Axis Mutual Fund, in connection with a front-running scandal. ED officials are conducting searches at multiple locations tied to Joshi as part of their investigation.
What is Front-Running?
Front-running is an illegal practice where fund managers trade based on non-public information about upcoming orders. This gives an unfair advantage to certain traders while negatively impacting other investors.
Past Investigations
Viresh Joshi has been under scrutiny before. In July 2022, the Income Tax Department conducted searches at over 25 locations, including Mumbai, Ahmedabad, Vadodara, Bhuj, and Kolkata, all connected to Joshi. The investigation targeted alleged tax evasion, and brokers and middlemen involved were also interrogated.
AMFI’s New Guidelines
In response to growing concerns over market abuse, the Association of Mutual Funds in India (AMFI) has introduced new guidelines. These are designed to curb practices like front-running and fraudulent transactions. Mutual fund companies are now required to set up systems to detect market abuse, with weekly alerts and a thorough review of all communications related to suspicious trades.
