The Securities and Exchange Board of India (Sebi) could soon issue interim orders imposing a market ban on the two former fund managers of Axis Mutual Fund (MF) for suspected front-running of trades, Business Standard said in a report.
“The market regulator has gathered prima facie evidence that demonstrates that the duo has violated the integrity of the market. While a detailed investigation is still pending in the matter, Sebi could take action under Section 11 (4) to prevent further harm to the investors and the securities market,” a source told the market daily.
The market regulator passes interim orders in rare instances when it thinks the action is needed to protect the integrity of the market. Over the past few weeks, Sebi has carried out extensive search and seizure operations across multiple cities to gather evidence on alleged front-running, noted BS, adding that the regulator has seized various records, documents, and digital evidence from phones, laptops, and hard drives used by 16 suspected entities.
Sebi has also been receiving inputs from its internal surveillance alert systems and also from the National Stock Exchange (NSE) on suspected front-running of trades at Axis MF, BS further pointed out.
Last month, Axis MF asked fund managers Viresh Joshi and Deepak Agarwal to leave the organisation due to alleged irregularities. Before terminating the duo, Axis MF had suspended both Agarwal and Joshi pending a probe. The fund house had reassigned responsibilities to other fund managers for seven schemes.
A source told BS that the regulator is in the process of ascertaining illicit gains made by the two and other connected entities and this will enable it to impound the bank accounts of these entities to the extent of alleged ill-gotten gains.
The fund house has also roped in two agencies to investigate the front-running case. The agencies have been tasked with identifying lapses, ascertaining if other individuals were involved in any way, the market daily further informed.
As per the report, Joshi has been associated with Axis AMC since 2009 and was the chief trader and fund manager. His core responsibilities included managing arbitrage fund and derivatives trading strategies. He used to oversee Axis Arbitrage Fund, Axis Technology ETF, and Axis Consumption ETF. Meanwhile, Agarwal joined Axis AMC in 2015 as a research analyst. He was promoted to assistant fund manager for equity in 2020. From 2021, he managed the Axis Quant Fund and the Axis Consumption ETF.
