MUMBAI: The Securities and Exchange Board of India (SEBI) has once again banned former infamous stockbroker Ketan Parekh from buying and selling securities. This time, the ban comes in response to allegations of front-running trades of a US-based fund. Parekh famously known as the notorious stock broker was convicted in 2008 for involvement in the Indian stock market manipulation scam that occurred from late 1998 to 2001.

SEBI's investigation revealed that Parekh had allegedly obtained non-public information about the trades of a major US fund from Singapore-based broker Rohit Salgaocar. Salgaocar had an agreement to refer trades of that fund to Motilal Oswal Financial Services Ltd. and Nuvama Wealth Management Ltd. Parekh then passed on this information to his associates to front-run the trades.

A 188-page order issued by Sebi's Whole-time Member Kamlesh Varshney stated, "Noticees no. 1 and 2 i.e. Rohit Salgaocar and Ketan Parekh devised the entire scheme to unjustly enrich from the NPI pertaining to the Big Client by orchestrating front running activities. Noticee no. 10 (Ashok Kumar Poddar) has admitted to be a facilitator in the front running activities. Further, Noticees no. 2 and 10 i.e. Ketan Parekh and Ashok Kumar Poddar had been prohibited from dealing in the securities and debarred from associating with the securities market in the past as well. Considering the same, Noticees no. 1,2 and 10 shall be restrained from buying, selling or dealing in securities or associating with any intermediary registered with SEBI, either directly or indirectly, with immediate effect."

The investigation, which covered a two-year period ending in June 2023, found that Parekh and his associates made approximately Rs 65.80 crore in unlawful gains through this scheme. SEBI has ordered the impounding of these gains and has frozen the bank accounts of the 22 entities involved in the scam. Others who are banned include GRD Securities, Salasar Stock Broking, Anirudh Damani, Ashok Kumar Damani and entities involving Basukinath Properties, APR Properties for acting in connivance with Parekh.

Parekh, who was previously banned by SEBI in 2003 for 14 years due to allegations of insider trading, price rigging, and illegal diversion of bank funds, has been described as a habitual offender by SEBI. The regulator's order highlights the need for interim action to prevent further illegal activities by Parekh and his associates.

The modus operandi of the scam involved Salgaocar relaying inside information to Parekh, who then disseminated instructions through WhatsApp groups. The probe revealed that Parekh, Salgaocar, and others were not only engaging in front-running trades but were also active buyers when venture capital firm Tiger Global sold shares of PB Fintech.

The scam was uncovered during a search and seizure operation at 20 locations across Kolkata and Mumbai. All accused entities have reportedly confessed to their roles in the scheme. SEBI's findings indicate that Parekh and Salgaocar were running the alleged scheme for almost 2.5 years and were caught following a new alert model for identifying information-based trades.