Sachin P Mampatta: Mumbai: DNA: Thursday, Oct 7, 2010:
Seems like HDFC Mutual Fund was not the only place where it happened there may be many more.
The Securities and Exchange Board of India (Sebi) is investigating instances of front-running in at least 10 mutual funds, including some marquee names, according to two people familiar with the development.
The probe process is still under way and final orders are yet to be passed in these cases, they said.
DNA had filed an application under the Right to Information Act seeking information on mutual funds that are being investigated for front-running.
In reply, Sebi confirmed the investigation but did not divulge the names of the funds.
“Please note that as the quasi judicial proceedings are in progress and the process has not reached its logical conclusion, Sebi is exempted from furnishing information as sought by you under Section 8(1)(h) of the RTI Act, 2005,” said Sebi.
Front-running is a process by which a person buys a stock ahead of a large order. This allows the person to piggyback on the price movement, which comes about as a result of the larger order.
By placing orders ahead of institutions, the impact cost for the investors in the mutual fund rises.
Recently Sebi passed an order against an employee of HDFC Mutual Fund, Nilesh Kapadia, who is said to have leaked information about selling and buying by the fund to a college friend and others.
This was detected by the regulator after stock exchanges had found certain coincidence between the trading pattern of individuals namely, Rajiv Ramniklal Sanghvi, Chandrakant P Mehta and Dipti Paras Mehta with that of HDFC Asset Management Company Ltd.
Sebi had investigated activity in the fund from October 15, 2008, to November 14, 2008. After the investigation, it asked the trustees of HDFC Mutual Fund to submit a plan for overhauling the internal control systems and the internal preventive measures of the AMC. They also banned the dealer from the securities market.
Seems like HDFC Mutual Fund was not the only place where it happened there may be many more.
The Securities and Exchange Board of India (Sebi) is investigating instances of front-running in at least 10 mutual funds, including some marquee names, according to two people familiar with the development.
The probe process is still under way and final orders are yet to be passed in these cases, they said.
DNA had filed an application under the Right to Information Act seeking information on mutual funds that are being investigated for front-running.
In reply, Sebi confirmed the investigation but did not divulge the names of the funds.
“Please note that as the quasi judicial proceedings are in progress and the process has not reached its logical conclusion, Sebi is exempted from furnishing information as sought by you under Section 8(1)(h) of the RTI Act, 2005,” said Sebi.
Front-running is a process by which a person buys a stock ahead of a large order. This allows the person to piggyback on the price movement, which comes about as a result of the larger order.
By placing orders ahead of institutions, the impact cost for the investors in the mutual fund rises.
Recently Sebi passed an order against an employee of HDFC Mutual Fund, Nilesh Kapadia, who is said to have leaked information about selling and buying by the fund to a college friend and others.
This was detected by the regulator after stock exchanges had found certain coincidence between the trading pattern of individuals namely, Rajiv Ramniklal Sanghvi, Chandrakant P Mehta and Dipti Paras Mehta with that of HDFC Asset Management Company Ltd.
Sebi had investigated activity in the fund from October 15, 2008, to November 14, 2008. After the investigation, it asked the trustees of HDFC Mutual Fund to submit a plan for overhauling the internal control systems and the internal preventive measures of the AMC. They also banned the dealer from the securities market.
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