Sebi imposes Rs 40 lakh penalty on two brokers in Axis Mutual Fund front-running case

Sebi penalised two brokerage firms and their associated officials in the Axis Mutual Fund front-running case. Woodstock Broking and its director, Suresh Kanmal Jajoo, each received a ₹10 lakh penalty. Marfatia Stock Broking and its managing director, Nishil Surendra Marfatia, were also each fined ₹10 lakh.

The penalties relate to the brokers’ role in enabling access to ODIN trading software. Sebi found that the software was installed and operated on computer systems used by Prijesh Kurani, who allegedly traded from Dubai. Marfatia’s IT employee Yunus Modan allegedly helped install the software.

The order highlights that registered brokers must closely control trading terminals, user access, and related infrastructure. Sebi said allowing a third party to use terminal access outside the authorised framework falls within the PFUTP Regulations. The penalties therefore addressed the brokers’ alleged failures in controlling access, not only the underlying trading allegations.

The total penalties amounted to ₹40 lakh across four respondents. Sebi divided the amount equally, imposing ₹10 lakh on each respondent. The recipients were Woodstock Broking, its director Suresh Kanmal Jajoo, Marfatia Stock Broking, and its managing director Nishil Surendra Marfatia.

This means the fine was not assigned only to the companies. Each brokerage’s named senior official also faced a separate penalty of the same amount. The structure produced two company penalties and two individual penalties, adding up to ₹40 lakh.

The financial amount reflects Sebi’s action over alleged failures in controlling access to trading systems. The regulator found that ODIN software was installed and operated on systems used by Prijesh Kurani. The software installation involved AnyDesk, a remote-access application, and Marfatia’s IT employee allegedly facilitated the setup.

Front-running is the practice of placing trades before a known or expected transaction, aiming to benefit from the price movement that may follow. It matters because the person trading first may gain an advantage unavailable to ordinary market participants. The article describes the conduct as alleged, not as an established fact in this answer.

During Sebi’s investigation, Viresh Joshi, then Axis Mutual Fund’s chief dealer, allegedly shared information about the fund’s impending trades with Prijesh Kurani. Kurani allegedly used multiple accounts to execute trades ahead of the mutual fund’s transactions. The trades were reportedly carried out from Dubai.

The key mechanism was advance information. Kurani allegedly knew what the mutual fund planned to trade, positioned himself beforehand, and then benefited from the sequence of transactions. Sebi’s investigation covered April 2021 to March 2022. The brokers’ alleged role concerned access to the trading software used in this activity.

Viresh Joshi was then the chief dealer at Axis Mutual Fund. Sebi’s investigation found that he allegedly shared information about the fund’s impending trades with Prijesh Kurani. Kurani allegedly used that information to execute trades through multiple accounts before the mutual fund’s transactions, from Dubai.

The two brokerages were Woodstock Broking and Marfatia Stock Broking. Sebi found that they had facilitated the installation and operation of their ODIN trading software on computer systems used by Kurani. The software was installed through AnyDesk, a remote-access application. Marfatia’s IT employee Yunus Modan allegedly facilitated the installation on Kurani’s system.

These roles describe both the alleged information flow and the technical access that supported the trading. Joshi was linked to the information, Kurani to the trades, and the brokers to the trading infrastructure. Sebi imposed penalties on both firms and their named directors over this access arrangement.

Installing ODIN on a third party’s computer created a regulatory problem because trading software and terminal access must remain within the broker’s authorised framework. Sebi said registered brokers are expected to exercise heightened care and control over terminal access, the user chain, and trading infrastructure.

In this case, ODIN was installed and operated on computer systems used by Prijesh Kurani, who allegedly executed the front-running trades from Dubai. AnyDesk, a remote-access application, was used for the installation. Sebi also found that Marfatia’s IT employee Yunus Modan had facilitated the setup.

The concern was not merely the software itself. It was the possibility that a third party could use broker-provided access outside approved controls and oversight. Sebi stated that permitting or enabling such access falls within the PFUTP Regulations. The order therefore places responsibility on brokers to secure their systems and monitor who can use them.

PFUTP stands for Prohibition of Fraudulent and Unfair Trade Practices, a set of Indian securities-market regulations. They address conduct that can make trading fraudulent, manipulative, or unfair. The article specifically quotes Sebi saying brokers must control terminal access, the user chain, and trading infrastructure.

That control matters because a trading terminal links a user to market activity. If a broker enables someone outside the authorised framework to access its software, the broker may lose visibility over who is trading and under whose authority. In this case, ODIN was installed on systems used by Prijesh Kurani through AnyDesk, a remote-access application.

Sebi said such conduct squarely falls within the PFUTP Regulations. The order therefore treats access management as a regulatory responsibility, not merely an internal technology issue. Brokers need to maintain control over their systems, users, and terminals so trading activity remains attributable and properly supervised.

Front-running can harm mutual-fund investors because another trader may position themselves before the fund’s transaction. The mutual fund may then trade at less favourable prices, affecting the value delivered to its investors. The article does not detail a measured loss to investors, but this is the established market concern behind front-running rules.

The alleged mechanism here was advance information about Axis Mutual Fund’s impending trades. Viresh Joshi allegedly shared that information with Prijesh Kurani, who allegedly traded through multiple accounts before the fund’s transactions. A trader acting first may benefit from price movements connected with the later fund trade.

Such conduct can also damage fairness and efficiency. Other investors do not receive the same information or opportunity, while prices may reflect strategic exploitation rather than equal competition. The case also highlights the importance of broker controls. Sebi’s penalties signal that firms must protect trading access and infrastructure from unauthorised use.