B Gopkumar, the managing director and chief executive officer of Axis Securities, has been appointed CEO of Axis Mutual Fund by Axis Asset Management Company. Gopkumar succeeds Chandresh Nigam as the company’s chief executive officer.
Since the fund house fired its chief dealer, Viresh Joshi, in a shocking case of suspected front-running in May 2022, the front-running scandal has plagued Axis MF. Following this, Joshi’s premises were raided by the income tax, and Joshi filed a wrongful termination lawsuit against his former employer.
In connection with the front-running case at the fund house, capital markets regulator Sebi recently barred 21 entities, including Viresh Joshi, the former fund manager of Axis Mutual Fund, from the securities market.
In addition, according to an interim order, the regulator has ordered the impoundment of wrongful gains totaling 30.56 crore rupees that they earned through “prima facie” front-running activities.
In the context of the stock market, the term “front-running” refers to the illegal practice of trading based on information obtained in advance from a broker or analyst before that information is made available to their clients.
The current proceeding involves the front running of Axis MF (Big Client) trades with a few suspected entities and trading members who coordinated closely to front run Big Client trades from September 2021 to March 2022.
Sebi discovered during the investigation that entities associated with Joshi, the then-chief dealer of Axis MF, were observed to have traded in various securities prior to the imminent orders placed on behalf of the Big Client.
These connected entities then rebalanced their prior trade positions taken on the exchange platform shortly after the Big Client’s orders were placed.
According to Sebi, placing orders ahead of and in anticipation of the price movement of scrips in a certain direction on account of the impending large buy or sell orders of the Big Client resulted in substantial profits being generated in the trading accounts of these connected entities.
As per the 96-page interim order, it was also noted that the trading accounts of the connected entities from which the front running trades were executed were set up by Sumit Desai, who appeared to be a market operator at Joshi’s direction.
Desai also introduced Joshi to Dubai-based Prijesh Kurani, who was given the responsibility of placing orders for front-running the Big Client’s trades in the trading accounts of the connected entities.
Sebi noted that the other entities, who had knowingly loaned their accounts to the front-runner, also played an equally significant role in the execution of those prima facie front-running trades.
“The manner in which Viresh Joshi has conducted himself as a dealer of Axis MF in devising a fraudulent scheme and carrying it out so meticulously over a prolonged period in collaboration with other dishonest entities to front run the trades of his very own mutual fund, where approximately “It smacks of rampant dishonesty and unfairness on the part of Viresh Joshi and his accomplices that 66 lakh unit holders have put an aggregate sum of AUM of 2.52 lakh crore as of March 31, 2022,” Sebi said.
As a result, Sebi prohibited 21 entities from engaging in securities market transactions or associating themselves with the market in any way, either directly or indirectly, until further orders were issued.
The order was issued after alerts from the Sebi’s surveillance system indicated that certain trades by suspected entities executed between September 2021 and March 31, 2022 appeared to have been executed outside of the normal trading process. They appeared to be transactions that were carried out in advance of Axis MF’s trades.
Sebi conducted search and seizure operations at a number of businesses, stockbrokers, and individuals, in response to the alerts.
The mutual fund managed by Axis Bank fired its chief trader and fund manager Viresh Joshi and fund manager Deepak Agrawal in May of last year due to allegations of front-running.
Axis AMC, on the other hand, did not elaborate on the violations that led to the dismissal of the two fund managers at the time.