SEBI has further directed them to disgorge the illegal gains along with simple interest at 12% per annum, calculated from 31 May 2022, the end of the investigation period, until the date of payment.
The other entities involved include: Khushboo Darshan Shah, Mihir Dhirajalal Savla, Chirag Mahendra Shah, Benzer Department Stores Pvt Ltd and CHL Stock Concepts Pvt Ltd.
The case relates to front-running of trades between April 2021 and May 2022. Unifi Capital Pvt Ltd (big client) has employed 13 registered stockbrokers to execute trades in the securities market, including Kotak Securities Ltd. During the investigation period, SEBI noted trades worth Rs6,568.63 crore (47.28% of the gross traded value of the big client) were executed by the big client through Kotak Securities. During the investigation, Mr Maheshwari was one of the dealers of Kotak Securities and was responsible for placing trading orders for the big client.
SEBI found that Mr Maheshwari misused his position to access confidential information regarding large trades by Unifi Capital that were pending and shared it with Darshan Shah.
According to SEBI, Darshan Shah and connected entities used this unpublished information to place trades ahead of the PMS client’s orders and square off their positions soon after the client’s trades influenced prices. This practice, commonly known as front-running, enabled them to generate consistent intraday profits.
The regulator noted a sharp rise in trading activity among the connected entities. The gross traded value of Darshan Shah, Khushboo Shah and Darshan Shah (HUF) increased more than fourfold, accompanied by a spike in intra-day trades and profits. A significant overlap was observed with the PMS client’s trades, 27.01% of overall scrip-days and 56.31% of intraday scrip-days were common, while 80.52% of intraday profits were generated on such overlapping days.
SEBI identified 433 scrip-days (426 in the cash segment and seven in derivatives) where trades were placed ahead of the client’s orders and squared off immediately after, benefiting from price movements triggered by the client’s transactions.
To establish the scheme, SEBI relied on call detail records, messaging data and trading analysis. It found frequent communication between Mr Maheshwari and Darshan Shah, including the use of auto-deleting messages on Telegram, indicating deliberate sharing of sensitive information. Location data showed that the individuals were often in close proximity, while trading records revealed a strong overlap between the scrips traded by the noticees and those traded by the PMS client.
The regulator also observed that multiple accounts belonging to family members, Hindu undivided families (HUFs) and corporate entities such as Benzer Department Stores Pvt Ltd and CHL Stock Concepts Pvt Ltd were used to execute trades. These accounts displayed similar trading patterns, suggesting coordinated activity driven by insider information.
A particularly serious finding was the alleged sharing of profits in cash between Darshan Shah and Mr Maheshwari. SEBI cited evidence from seized mobile data, including the use of a currency note image to identify cash exchanges, suggesting attempts to conceal illicit gains.
The investigation concluded that the front-running activity spanned 433 scrip-days, with total unlawful gains estimated at ₹1.30 crore. SEBI held that the actions of the noticees violated provisions of the SEBI Act and the PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003.
In its order, SEBI noted that the unlawful gains had already been impounded and deposited earlier. Some noticees had approached the securities appellate tribunal (SAT), which granted limited relief subject to deposit of the impounded amount; however, the core findings of SEBI’s investigation remain unchanged.
The regulator has provided a detailed break-up of the unlawful gains made through the scheme, specifying the entities jointly and severally liable for disgorgement.
It has also outlined the penalties imposed on each noticee under various provisions of the SEBI Act.
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