While asking Sachin Bhogte, Samir Bhogte and Suchita Bhogte to disgorge Rs1.08 crore, the unlawful gains earned by them from front-running trades, Securities and Exchange Board of India (SEBI) imposed a penalty of Rs10 lakh on Sachin Bhogte and also barred him from markets for six months.
In an order, G Ramar, chief general manager (CGM) of SEBI, noted, "I note that Sachin Bhogte, while being a dealer of the 'Big Clients' and having knowledge of big clients' impending orders, front ran the trades of 'Big Clients' by using the trading account of his father (late Ashok Yashwant Bhogte) during the investigation period (IP) and gained benefit from non-public information.
"....I note that the noticees in the process of front running trades of the Big client have not only interfered with the market forces of supply and demand of a particular scrip but have also artificially influenced the price and volume of the scrip and have thus, prima facie distorted them. The aforesaid is tantamount to fraud within the meaning provided in Regulation 2(1)(c) of the PFUTP Regulations. Therefore, I note that Sachin Bhogte and late Ashok Bhogte have violated Section 12A(a), (b), (c), (e) of the SEBI Act and Regulation 3(a), 3(b), 3(c), 3(d), 4(1) and 4(2)(q) of PFUTP Regulations," the SEBI order says.
SEBI had concluded an extensive investigation into the trading activities of Sachin Bhogte, a dealer associated with Girik Wealth Advisors Pvt Ltd, covering the period from 1 January 2018 to 31 December 2021. The investigation revealed a complex scheme of front-running, a form of insider trading involving significant unlawful gain.
The investigation began with suspicions that Sachin Bhogte had violated provisions of the SEBI Act, 1992, and the SEBI PFUTP Regulations, 2003. SEBI issued a show-cause notice (SCN) on 18 March 2024 to Sachin Bhogte and other involved parties, detailing their investigation findings.
Girik Wealth Advisors, which is registered as a portfolio manager with SEBI, and Girik Multicap Growth Equity Fund, a SEBI-registered Category III Alternate Investment Fund, are the primary clients involved in the scheme.
SEBI investigation revealed that Sachin Bhogte, leveraging his position as a dealer for these clients, was privy to non-public information regarding impending trades. He reportedly exploited this information to conduct trades in his father's account through Motilal Oswal Financial Ltd, allowing him to place orders ahead of the clients' trades, a tactic known as front-running.
Further, the investigation uncovered that Sachin Bhogte executed trades using a mobile application installed on his device which was linked to his father's trading account. Through this account, he placed orders ahead of the large trades executed by Girik Wealth Advisors, profiting significantly from the subsequent market movements.
SEBI detailed analysis revealed 222 instances of a buy-buy-sell (BBS) pattern and 356 instances of a sell-sell-buy (SSB) pattern on National Stock Exchange (NSE) and additional instances on BSE. These patterns were identified as characteristic of front-running activities, where Sachin Bhogte would buy or sell stocks just before his clients, only to quickly reverse the trades once the clients' trades influenced the market prices, the regulator says.
The market regulator further observed in one notable transaction on 3 August 2021, involving the stock STOVEKRAFT, Sachin Bhogte placed buy orders just two minutes before Girik Wealth Advisors did the same. He then sold these shares, with 85.44% of them going to the very client whose impending trades he had anticipated. This transaction alone netted him a profit of Rs43,878.
Mr Ramar, the QJA of SEBI, also highlighted a similar pattern in other stocks like CHOLAFIN and CDSL, where Sachin Bhogte trades consistently preempted those of Girik Wealth Advisors, leading to substantial profits through this illicit strategy. The cumulative unlawful gains from these front-running activities amounted to Rs1.08 crore .
Sachin Bhogte admitted to these activities during the investigation, confirming his role in exploiting his father's trading account to execute front-running trades. Despite his father, Ashok Yashwant Bhogte's death in April 2023, SEBI pursued the case under Section 28B of the SEBI Act, making the legal heirs Sachin Bhogte, Samir Bhogte and Suchita Bhogte liable for the unlawful gains accrued.
SEBI's investigation revealed that funds for these trades were provided through cheques signed by the late Ashok Bhogte and the proceeds were deposited into his bank account. Given this evidence, SEBI concluded that both Sachin and his late father were complicit in the scheme. The regulator has invoked provisions under the SEBI Act to impose penalties on Sachin Bhogte and to issue directions for the disgorgement of unlawful gains.
