Front-running Redux

Ketan Parekh has again been accused by Sebi. This time the allegations are of front-running, an unethical practice in financial markets

- BY AMIT MUDGILL

A JANUARY 2 INTERIM order by capital markets regulator, the Securities and Exchange Board of India (Sebi), has reignited memories of the infamous market manipulation that took place in the late 1990s and early 2000s. The investigation found that former stockbroker Ketan Parekh one of the main accused in the 1999-2001 market manipulation scam-was allegedly involved in a front-running scam.

Front-running is an unethical practice. It involves the use of confidential information about pending transactions by traders or brokers to profit unfairly by taking advance positions. This is a violation of Section 12A of the Sebi Act and the Sebi (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003.

UNDER THE SCANNER

Parekh, once an associate of Harshad Mehta, has been once again been accused of orchestrating front-running trades for a "big client" through a sophisticated network

Parekh's manipulation of the stocks in the late '90s led to the subsequent market crash. A group of 10 stocks-which were mostly from information technology, communication, and entertainment sectors-were favoured by Parekh. They rose sharply, but crashed in 2001. Parekh was later exposed for market manipulation.

Parekh, once an associate of Harshad Mehta, has been once again accused of orchestrating frontrunning trades of a "big client" through a sophisticated network, Sebi's 30-month investigation, from January 2021 to June 2023, revealed.