Sebi to define 'front-running' soon: Sinha

Sebi

Market watchdog Sebi has said it will review the regulations regarding fraudulent and unfair trade practices as the present rules need to clearly define 'front-running'.

The comment follows a recent case on the issue where the tribunal, SAT, set aside a Sebi order.

"Front-running is an offence and we need to make a lot of improvement... Regulations on insider-trading are different, and we have to have a serious re-look at regulations," Securities and Exchange Board Chairman Upendra Kumar Sinha told reporters at a media workshop organised by the regulator on securities market here yesterday.

Front-running is an illegal practise where a stockbroker executes orders on a security for his/her own account, taking advantage of advance knowledge of pending orders.

Front-runners use confidential information for buying or selling securities ahead of a large order with the objective of benefiting from the subsequent price movement.

Earlier this month, the Securities Appellate Tribunal (SAT) set aside a Sebi order penalising three persons for front-running -- it was the first case involving individuals -- which raised questions about the efficacy of the law.

The Sebi had barred the trio from the market, and imposed a fine of Rs 1.13 crore on two of them. They had allegedly made a profit of Rs 1.56 crore from 557 synchronised trades on the NSE and 50 on the BSE between January 2007 and March 2009.

But setting aside the Sebi order, SAT said the existing prohibition of fraudulent and unfair trade practises (FUTP) regulations of 2003 do not clearly define "front-running", and even if a particular fraudulent transaction could be construed as front running, the regulations applied only to market intermediaries and not individuals.

Traders Kanaiyalal Baldevbhai Patel and Anandkumar Baldevbhai Patel were in the dock for executing orders on the information received from cousin Dipak Patel, who was a portfolio manager at Passport India Investment Mauritius.

... contd.

Please read our terms of use before posting comments
TERMS OF USE: The views expressed in comments published on indianexpress.com are those of the comment writer's alone. They do not represent the views or opinions of The Indian Express Group or its staff. Comments are automatically posted live; however, indianexpress.com reserves the right to take it down at any time. We also reserve the right not to publish comments that are abusive, obscene, inflammatory, derogatory or defamatory.