In the past few weeks, Sebi has been receiving alerts from its internal surveillance alert system and inputs from National Stock Exchange about suspected front-running of trades at Axis Mutual Fund, the person said. “Based on the alerts and the surveillance inputs, the regulator has initiated investigation,” the person said.
Email sent to Axis Mutual Fund remained unanswered.
A forensic audit report conducted by Axis Mutual on suspected transgressions by two fund managers was submitted to Sebi recently. The fund house said last week it had terminated the services of the two executives accused of wrongdoings – Viresh Joshi, chief trader and fund manager and Deepak Agrawal, an assistant fund manager. The allegations against the money managers were front-running, receiving kickbacks from brokers and executing trades that were detrimental to the interests of the unitholders.
In the search and seizure operations, Sebi officials searched the official and residential premises of the 16 entities and individuals, who have been suspected to be involved in front-running with the Axis executives, said another person close to the development.
The regulator has seized various records, documents and digital evidence extracted from the mobile phones, laptops, desktops, tablets and hard drive disks found in the custody of these entities, he said.
“A detailed investigation is in progress,” said the second person quoted above. The probe by Axis MF found that Joshi would tell the broker about the shares the fund house was about to buy in bulk. After the broker bought the stock, the fund house would buy the stock from the broker at a higher price. As part of the arrangement, Joshi received kickbacks from brokers.