SEBI Cracks Down on Ketan Parekh's Latest Market Scheme

MUMBAI: Ketan Parekh, a name synonymous with stock market manipulations, finds himself in the regulatory net once again. The Securities and Exchange Board of India (SEBI) has uncovered a front-running scheme involving Parekh and Rohit Salgaocar, a Singapore citizen of Indian origin. This duo orchestrated a plan to front-run the trades of a foreign fund for illicit gains.

Despite Parekh not executing any trades himself, his associates in Kolkata carried out the operations based on inside information. SEBI has banned Parekh, Salgaocar, and 20 other entities from the market, demanding they return the illegal gains amounting to nearly Rs 66 crore.

Investigations revealed that a significant US-based asset manager, with funds registered as foreign portfolio investors in India, consulted Salgaocar before placing trades. Salgaocar, in turn, had arrangements with Motilal Oswal group and Nuvama for executing these trades for a commission.

Inside the Scheme

Salgaocar would receive orders from the US-based fund and instruct dealers at Motilal Oswal and Nuvama to execute the trades. However, before these orders were communicated, the same information was passed on to Parekh, who then relayed it to his conduits in Kolkata. These conduits executed trades based on this inside information, ahead of the genuine trades by the dealers.

SEBI's investigation also uncovered that Parekh frequently changed his phone numbers, and his conduits used pseudonyms to save his numbers in their phones. Parekh and Salgaocar admitted to regular interactions, which were followed by messages about trades to Parekh's conduits.

SEBI's Action

In an interim order, SEBI has ordered the impounding of illegal gains from 22 entities, including Parekh and Salgaocar, and has barred them from the market. The regulator has also frozen the demat and bank accounts of all involved entities, preventing them from redeeming their mutual fund investments. These entities have been given 21 days to present their case to SEBI's investigators.