AXIS SECURITIES SETTLES THE CASE OF FRONT-RUNNING WITH SEBI-WHAT IS FRONT-RUNNING ?

WHAT IS FRONT-RUNNING ?

Front-running occurs when a mutual fund manager or trader executes orders on a security for their own account before executing orders for their clients. This gives the trader an unfair advantage, allowing them to profit from the expected movement in the security’s price, resulting from the larger client orders that follow.

????????? ?? IS FRONT-RUNNING ILLEGAL?

Front-running is considered highly unethical and illegal because it exploits confidential information and undermines market integrity.

It breaches the trust and fiduciary duty that fund managers owe to their clients. Regulatory bodies like SEBI enforce strict rules to prevent such practices and ensure fair and transparent markets.

HOW FRONT-RUNNING AFFECT THE NET ASSET VALUE IN MUTUAL FUNDS

"Front-running erodes investor trust in the fund house, which can lead to redemptions, affecting the fund's Net Asset Value (NAV). The SEBI‘s investigation itself can create uncertainty, causing investors to hold off on further investments or even redeem existing ones until the situation is resolved,".

HOW WORRIED SHOULD INVESTORS BE?

For ordinary investors, front-running can lead to several negative outcomes:

·????? Higher costs: Investors might end up paying more for securities due to artificial price movements caused by front-running.

·????? Less favourable prices: The advantage held by front-runners often results in worse trade execution prices for regular investors.

·????? Erosion of confidence: When such practices come to light, it shakes investor confidence in the fairness and integrity of the financial markets.

AXIS SECURITIES SETTLES THE CASE OF FRONT-RUNNING WITH SEBI

Axis Securities settled a case, involving front-running trades by its former employee Vikrant Bhimrao Kadam and his friend, with markets regulator SEBI after paying ?14.62 lakh towards the settlement amount.

It was alleged that as a stock broker, Axis Securities failed to exercise appropriate due diligence in the matter in its dealer and branch manager compliance policy.

Axis Securities said it has strengthened its operations through process reviews and maintain zero tolerance for unethical practices, ensuring the highest standards of integrity.

EARLIER FRONT RUNNING CASE BY AXIS MUTUAL FUND

However, this is not the first time SEBI has taken such actions; in 2022, a similar investigation into Axis Mutual Fund for front-running resulted in 21 entities being barred from accessing capital markets.

R V SECKAR , FCS

79047 19295

[email protected]