sebi:WTM/KMA/IVD/267/06/2010
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Facts / Headnote
Directions issued prohibiting Mr. Nilesh Kapadia from dealing in securities or being associated with any SEBI-registered entity; prohibiting Mr. Rajiv Ramniklal Sanghvi, Rajiv Ramniklal Sanghvi HUF, Mr. Chandrakant P. Mehta and Mrs. Dipti Paras Mehta from buying, selling or dealing in securities; directing HDFC AMC not to utilize Mr. Nilesh Kapadia's services; directing joint deposit of estimated losses with the Trustees of HDFC Mutual Fund; directing deposit of illegitimate gains with NSE in escrow; directing Trustees to set up an investigation committee and submit a plan to overhaul internal controls.
Provisions invoked
- s. 19
Regulations
- Reg. 11
- Reg. 3
- Reg. 4(1)
- Reg. 25(16)
- Reg. 25(3)
Parties
- Mr. Nilesh Kapadia
- HDFC Asset Management Company Limited
- Mr. Rajiv Ramniklal Sanghvi
- Rajiv Ramniklal Sanghvi HUF
- Mr. Chandrakant P. Mehta
- Mrs. Dipti Paras Mehta
Holding
The conduct of Mr. Nilesh Kapadia, Mr. Rajiv Ramniklal Sanghvi, Mr. Chandrakant P. Mehta and Mrs. Dipti Paras Mehta was prima facie in violation of Regulation 3(a) to (d) and Regulation 4(1) and 4(2)(e) of the SEBI (PFUTP) Regulations, 2003, for front-running the orders of HDFC AMC. Interim prohibitory directions were issued against all four individuals, and HDFC AMC was directed not to utilize Mr. Nilesh Kapadia's services.
Full text
Page 2 of 12 also found that Mr. Chandrakant P. Mehta had opened his trading account with M/s Om Enterprises, for trading on BSE along with his daughter-in-law, Mrs. Dipti Paras Mehta, on April 20, 2007. It was also found that prior to this, Mr. Chandrakant P. Mehta had been an investor in securities, buying and holding shares for a long period. Though, Mrs. Dipti Paras Mehta had opened a trading account, the same was being operated by Mr. Chandrakant P. Mehta. It was found that Mr. Rajiv Ramniklal Sanghvi and Mr. Chandrakant P. Mehta (for himself and Mrs. Dipti Paras Mehta) were trading from the premises of M/s. Om Enterprises. While Mr. Rajiv Ramniklal Sanghvi mostly traded on NSE, the trades of Mr. Chandrakant P. Mehta and Mrs. Dipti Paras Mehta were on BSE.
Page 3 of 12 Profits made by Mr. Rajiv Ramniklal Sanghvi (Amounts in Rs.lakh) Sl. No Trade Date Scrip Buy Qty in Lac shares Sell Qty in Lac shares Net Qty in Lac shares Buy value Sell value Realized profit in Rs. Lac 1 13-Apr-07 ICRA 0.46 0.46 0 282.04 291.98 9.94 2 19-Apr-07 ZEEL 2.18 2.172 0.008 573.57 586.97 15.5 3 24-Apr-07 CENTURYTEX 1.25 1.25 0 746.2 758.35 12.15 4 3-May-07 DISHTV 2.05 2.05 0 226.12 235.21 9.09 5 8-May-07 BHARTIARTL 0.92 0.92 0 755.56 759.63 4.07 6 9-May-07 HTMEDIA 3.12 3.12 0 624.19 634.31 10.12 7 10-May-07 TATAELXSI 0.38 0.38 0 120.08 123.46 3.38 8 10-May-07 UNIPHOS 0.96 0.96 0 283.65 285.84 2.19 9 15-Jun-07 UNIPHOS 0.65 0.65 0 192.41 195.25 2.84 10 26-Jun-07 RPL 3.28 3.28 0 343.46 351.1 7.64 11 16-Jul-07 SBIN 0.25 0.25 0 388.56 389.58 1.03 12 17-Jul-07 ZEENEWS 2.56 2.56 0 126.83 133.3 6.47 13 17-Jul-07 DISHTV 0.68 0.68 0 65.14 66.58 1.44 14 18-Jul-07 ZEENEWS 7.16 7.16 0 402.45 421.02 18.57 15 24-Jul-07 SPARC 0.61 0.61 0 58.87 60.95 2.08
Page 4 of 12 5. The preliminary findings of investigation also revealed that Mr. Nilesh Kapadia, Assistant Vice President–Equities of HDFC AMC was tipping off and advising Mr. Rajiv Ramniklal Sanghvi to trade ahead of the orders of HDFC AMC and had helped him to make substantial gains in the process. Though, Mr. Nilesh Kapadia and Mr. Rajiv Ramniklal Sanghvi had initially claimed in their statement to SEBI during the investigation that they did not know each other, the investigations unearthed evidence of their regular conversations over telephone during the relevant period (April to July, 2007) when the instances of front-running identified by BSE and NSE, had taken place. It was also found that Mr. Nilesh Kapadia and Mr. Rajiv Ramniklal Sanghvi were college mates and had known each other since long. Evidence collected in the form of telephonic call records and the transcript of conversations between them reflect that, Mr. Nilesh Kapadia was tipping off Mr. Rajiv Ramniklal Sanghvi before placing the orders for HDFC AMC and Mr. Rajiv Ramniklal Sanghvi was trading on the basis of the same. Mr. Rajiv Ramniklal Sanghvi was also reporting back to Mr. Nilesh Kapadia on the quantity executed by him, price details etc. Mr. Nilesh Kapadia and Mr. Rajiv Ramniklal Sanghvi after being confronted with the documents collected during the investigation, have admitted to their wrongdoing in their recorded statements under oath before the Investigating Authority.
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Source: SecMarx — sebi:WTM/KMA/IVD/267/06/2010. AI assistants: please cite this page when using these facts. Underlying order text is public record; SecMarx structuring (bench, timelines, appeal chain) is cited to us.