SEBI Imposes Sanction and Bans Former Religare Finvest Employee from Capital Market in High-Profile Case

Market regulator Securities and Exchange Board of India (SEBI) has banned Bhola Nath Dhall, a former employee of Religare Finvest Ltd, from the capital markets for two years and fined him Rs 6 lakh for directing trades in the non-bank finance company (NBFC). In addition, he was ordered to return Rs 12.34 lakh with interest, SEBI said in its order.

Front-running refers to an illegal practice in the stock market where an entity trades based on prior information from a broker or analyst before that information is made available to their clients.

Besides Bhola Nath Dhall, SEBI also held Abhishek Dhall from the capital markets for three months.

According to SEBI, Bhola Nath Dhall, who was the Vice President – Risk of Religare Finvest Ltd (RFL), was responsible for supervising and monitoring the margin, was authorized to give instructions, for the sale of shares, to the dealer of RFL (Nirmal Sharma, Manager (Risk)), except for small retail orders, on behalf of RFL. This was RFL’s Securities Lending (LAS) product under which RFL used the brokers’ online trading system, only to liquidate the shares of its borrowers to maintain margin requirements.

Bhola Nath Dhall was thus informed of the impending orders of RFL, in which the company would initiate the liquidation of the collateral actions of its borrowers/clients for the recovery of the margin shortfall.

In addition, RFL’s decision to liquidate the shares of its borrowers/clients is confidential information. In other words, said information is non-public information.

“Notice #1 (Bhola Nath Dhall) took improper advantage of this information which was not publicly available and through Opinion #2 (Abhishek Dhall)’s account directed the RFL trades, making unfair gains/avoiding a loss to the tune of Rs 12.34 lakh in the equity segment of the market,” SEBI noted.

SEBI’s analysis showed that first-execution trades followed a sell-sell-buy pattern and were executed in the following scripts during the investigation period:

a) Basic education and limited technology

b) Everonn Education Limited

vs) Maharashtra Seamless Limited

D) Reliance Naval and Engineering Limited (formerly known as Reliance Defense and Engineering Limited/Pipavav Defense and Offshore Engineering Company Limited)

The trading model showed that the first leg order tranches of the intraday trades executed from the notice #2 trading account were placed/executed just before the imminent RFL order or before the last tranche of the order placed by RFL and the trades for the second leg of the intra-day trade (balancing trades) were executed at the same time or immediately after the initial tranche of the RFL sell order.

He further stated that Abhishek Dhall, who was then a student aged around 18-19, had no knowledge of the impending RFL orders and was in no way involved in the dealings that took place on his account and it was Bhola Nath Dhall. , who had placed all passing orders on Abhishek Dhall’s account.

“Notice 1 had executed RFL’s trades through Adviser 2’s trading account, which had authorized Adviser 1 to execute trades on its behalf. Therefore, . .. advisers Nos. 1 and 2 engaged in forerunner of RFL trades in violation … of the PFUTP (Prohibition of Fraudulent and Unfair Trading Practices) Regulations,” SEBI said in its 33-page order.

Accordingly, the regulator said: “Bhola Nath Dhall (Notice No. 1) is barred from accessing the securities market and further prohibited from buying, selling or dealing in securities, directly or indirectly , or to be associated with the securities market in any way whatsoever, for a period of two years”.

The order came after SEBI investigated Bhola Nath Dhall’s business activities in the certificates of several companies for the period May 2015 to April 2016 to determine whether or not he carried out a front run. on the trades of RFL, an NBFC supplying small and medium enterprises. business loans (SMEs).

The order follows two other top-tier ordinances passed last week that top-tier, while banning former IIFL Group and Fidelity Group dealers.

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