SEBI Uncovers ₹65.77 Crore Front-Running Scam Involving Ketan Parekh

The Securities and Exchange Board of India (SEBI) has issued an interim order cum show-cause notice (SCN) in a ₹65.77 crore front-running scam. The scam revolves around Ketan Parekh, a previously banned stock market operator, and Rohit Salgaonkar, a Singapore-based trader. Both allegedly exploited non-public information (NPI) related to trades by a major US-based fund house, referred to as the “Big Client,” whose funds are registered as Foreign Portfolio Investors (FPIs) in India.

Key Players and the Scheme

Ketan Parekh and Rohit Salgaonkar are at the centre of SEBI’s allegations. SEBI’s order noted that Salgaonkar, leveraging his close connections with the Big Client’s traders, gained access to NPI about upcoming trades. This information was systematically passed on to Parekh, who used pseudonyms like “Jack” and “Boss” to instruct his network of front runners (FRs) to execute trades ahead of the Big Client. Salgaonkar admitted that Parekh fulfilled nearly 90% of the Big Client’s trades, enabling significant illegal profits.

Notably, SEBI highlighted the recurring involvement of Ketan Parekh in securities market violations. Parekh, already debarred from securities markets for 14 years, utilized WhatsApp chats and calls to issue timely and specific trading instructions.

SEBI’s Observations and Immediate Actions

The SEBI order underscored the mechanics of the scam, detailing how information flowed from the Big Client’s traders to Salgaonkar and eventually to Parekh. WhatsApp chats and calls revealed Parekh’s active orchestration of the trades. While Motilal Oswal and Nuvama Wealth Management facilitated the Big Client’s trades, SEBI found no evidence implicating these entities in fraudulent activities.

As an interim measure, SEBI has restrained Ketan Parekh, Rohit Salgaonkar, and their associate Ashok Kumar Poddar from buying, selling, or dealing in securities or associating with intermediaries registered with SEBI. The regulator also questioned the accused on the source and handling of NPI, the communication of trading instructions, and the profit-sharing arrangements within the network.

Conclusion

SEBI’s investigation into this high-profile front-running scam highlights the persistent challenges of tackling insider trading and market manipulation.  By naming key players and outlining their alleged roles, SEBI aims to ensure accountability and protect the integrity of the securities market.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.