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NEW DELHI: The Securities and Exchange Board of India has imposed a combined penalty of Rs 40 lakh on four entities, including two brokerage houses and their respective directors, for their alleged involvement in the Axis Mutual Fund front-running case. In an order issued on Tuesday, the capital markets regulator penalised Woodstock Broking and its director, Suresh Kanmal Jajoo, along with Marfatia Stock Broking and its director, Nishil Surendra Marfatia, directing each entity to pay Rs 10 lakh within 45 days of receipt of the order. The watchdog held that the brokerages violated regulations prohibiting fraudulent and unfair trade practices by providing technical facilities and trading infrastructure that facilitated the illicit transactions.
The regulatory action stems from an investigation initiated after surveillance systems flagged suspicious transactions conducted ahead of significant orders placed by Axis Mutual Fund. The inquiry focused on activities executed between April 1, 2021, and March 31, 2022, to determine whether market participants utilised non-public, confidential information regarding substantial mutual fund trades to purchase or sell the same securities in advance. Such front-running practices undermine price discovery, compromise overall market integrity, and place regular public investors at a severe disadvantage.
Infrastructure Extended to Unregistered Overseas Entity
The investigation revealed that both brokerage firms facilitated the installation and day-to-day operation of their ODIN trading terminals on an off-site computer system operating in Dubai. This terminal was accessed and utilised by an individual named Prijesh Kurani. According to regulatory findings, Kurani held no official status as an authorised person or registered dealer with either Woodstock Broking or Marfatia Stock Broking. Despite the complete absence of regulatory credentials, he was granted access to the firms’ core trading setup to route orders.
Technical Trail and Digital Evidence Trace Remote Access
To establish Woodstock Broking’s culpability, the market regulator examined WhatsApp messages, Media Access Control identifiers, and Internet Protocol address logs. The findings indicated that company information technology personnel actively assisted in providing remote access via the AnyDesk application, thereby allowing the ODIN terminal to run seamlessly on the computer system stationed in Dubai. Furthermore, the trading account of an entity named Visa Capital Partners, which featured in the front-running activities, was linked directly to Woodstock Broking, with Jajoo also holding a partnership in the firm.
Regulatory Censure for Breaching Market Integrity Rules
A parallel technical evaluation of Marfatia Stock Broking incorporated the formal statement of its managing director, Nishil Marfatia, along with internal messaging records and digital forensic data. Regulatory officials identified identical MAC addresses across systems deployed by both brokerages, confirming an operational nexus between the two entities. The regulator concluded that both firms played an instrumental role in facilitating fraudulent operations by furnishing infrastructure and technical assistance, thereby constituting a direct breach of the Prohibition of Fraudulent and Unfair Trade Practices regulations.
