Case Overview

This adjudication order pertains to an investigation into front-running of trades of Axis Mutual Fund (the "Big Client") during April 01, 2021 to March 31, 2022. The investigation revealed that Woodstock Broking Pvt. Ltd. (Noticee 1) and Marfatia Stock Broking Pvt. Ltd. (Noticee 7) facilitated execution of alleged front-running trades by enabling access to trading terminals and providing IT support for operation of such terminals from Dubai.

The scheme involved Viresh Joshi, Chief Dealer of Axis Mutual Fund, who allegedly shared non-public information about impending orders with Prijesh Kurani, who executed front-running trades from Dubai using various trading accounts. The brokers facilitated this by installing their ODIN trading terminal software on Kurani's systems using AnyDesk remote access software and providing technical support.

Woodstock Broking facilitated trades through the account of Visa Capital Partners (where director Suresh Jajoo was a partner), while Marfatia Stock Broking facilitated trades through accounts of Nishil Marfatia (director), Olga Trading Pvt. Ltd., Bhavin Shah, and Rupal Shah. Technical evidence showed common IP addresses and MAC IDs linking the trades executed through both brokers to the same computer systems in Dubai.

Final Outcome

The Adjudicating Officer found that:

  • Woodstock Broking Pvt. Ltd. and Marfatia Stock Broking Pvt. Ltd. violated sections 12A(a), (b), and (c) of the SEBI Act and regulations 3(a), (b), (c), (d) and 4(1) of the PFUTP Regulations by facilitating the front-running scheme
  • Suresh Kanmal Jajoo (Director of Woodstock) and Nishil Surendra Marfatia (Director of Marfatia) were liable under section 27 of the SEBI Act for their companies' violations
  • Other directors (Noticees 3-6 and 9) were not penalized due to lack of evidence of their involvement
  • Noticee 10 (Surendra Mangaldas Marfatia) passed away during proceedings, and the case against him was abated

Penalties imposed under section 15HA of the SEBI Act:

  • Woodstock Broking Pvt. Ltd.: ₹10,00,000
  • Mr. Suresh Kanmal Jajoo: ₹10,00,000
  • Marfatia Stock Broking Pvt. Ltd.: ₹10,00,000
  • Mr. Nishil Surendra Marfatia: ₹10,00,000

Total penalty: ₹40,00,000

The penalties must be paid within 45 days of receipt of the order, failing which recovery proceedings may be initiated.

Topics: Front-running, Broker Regulation, Market Manipulation