New Delhi: the Securities and Exchange Board of India (Sebi) took decisive action against five individuals involved in front-running activities in the stock market. Sebi banned these individuals from participating in the securities markets for one year and ordered them to repay illicit profits amounting to nearly Rs 1.53 crore.
The regulator imposed a fine of Rs 10 lakh on Nikhil Khaitan and Rs 5 lakh each on Om Prakash Khaitan, Manju Khaitan, Neha Khaitan, and Nidhi Tibrewal. Front-running is an illegal practice where someone uses confidential information about upcoming trades, typically from a broker or analyst, to make trades before that information becomes public.
Sebi’s 49-page final order revealed that Nikhil Khaitan, a dealer for major clients, exploited his access to information about their impending orders. He used the trading accounts of the other four individuals—referred to as “front-runners” (FRs)—to execute trades ahead of the big clients, profiting from non-public information during the investigation period from September 2016 to August 2022. The regulator emphasized that this front-running not only disrupted the natural supply and demand dynamics of specific stocks but also artificially manipulated their prices and trading volumes. This behavior violated Sebi’s Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) regulations.
Sebi’s Quasi-Judicial Authority, G Ramar, noted that Nikhil, through the accounts of Om Prakash, Manju, Neha, and Nidhi, had been engaging in these illicit trades for six years. The order held all five individuals accountable for repaying the wrongful gains earned by front-running the trades of big clients.
As a result, Sebi barred the Khaitan family members and Nidhi Tibrewal from the securities market for one year. The regulator also directed them to collectively repay Rs 1.52 crore within 45 days of the order. The investigation stemmed from alerts raised by Sebi regarding suspicious trading activities by the Khaitan family, who were found to have colluded to exploit the orders of major clients for substantial profits.