Reported By:
| Edited By: Nitin Shrivastava |Source: DNA |Updated: Mar 17, 2018, 04:23 AM IST
The Securities and Exchange Board of India (Sebi) has pulled up HDFC Asset Management Company over the involvement of one of its key employees in unfair practices, compromising the interests of numerous unit holders.
Sebi has found Nilesh Kapadia, assistant vice president - equities at the country’s second-largest fund house, guilty of masterminding the front running of its orders.
Investigations by the stock market regulator revealed that Kapadia was tipping off and advising his long-time friend and college mate Rajiv R Sanghvi to trade ahead of the orders of HDFC AMC and had helped him to make substantial gains in the process.
These instances of front running of orders took place during April-July 2007 when Rajiv R Sanghvi along with Chandrakant P Mehta and Dipti P Mehta had entered into 38 intraday transactions cumulatively on NSE and BSE.
In these transactions, these three were placing buy/ sell orders ahead of substantial buy/sell orders of HDFC AMC.
Their orders were successively followed by the buy/ sell by HDFC AMC till finally, the aforesaid persons could square off their trades within the same trading session, substantially against the orders of HDFC AMC that were still coming in.
Due to these front running orders, the customers of the fund have been deprived of possible benefits. These front running orders had increased the cost of acquisition of shares and reduced the realisations from the sale of shares, for the concerned mutual fund schemes and portfolio management clients.
HDFC AMC, along with Kapadia, shall be liable to deposit the estimated losses of approximately Rs 2.38 crore to trustees of HDFC Mutual Fund. The amount would be held by the trustees in an account segregated for this purpose till further orders, Sebi said.
Further, the regulator has directed HDFC AMC not to utilise the services of Nilesh Kapadia for trading activities and to institute an internal inquiry.
“The Trustees of HDFC Mutual Fund shall, within a period of one month from the date of this order, submit a plan to overhaul the internal control systems and the internal preventive measures of HDFC Asset Management Company Limited, to avoid such instances in future,” said the Sebi circular.
The regulator has also barred the people involved in trades, along with Kapadia, from trading in the securities market. The regulator has further instructed the three beneficiaries to redeposit the illegitimate gains of around Rs 2 crore with the stock exchange.
