SEBI Penalizes Entities for Front-Running Client Trades — Upholding Market Integrity

Mumbai, October 27, 2025:
The Securities and Exchange Board of India (SEBI) has imposed a joint penalty of Rs 10 lakh on Dilip Kumar Kanoria, Seema Kanoria, Sakshi Kanoria, and Dilip Kumar Kanoria (HUF) for engaging in front-running activities while executing trades through KNA Share Brokers Pvt. Ltd.

The order, issued by Adjudicating Officer Amit Kapoor, marks another decisive step in SEBI’s ongoing efforts to deter manipulative practices and protect investor confidence in India’s securities markets.

Background of the Case

SEBI investigated trading activities of the Kanoria entities for the period January 1, 2021 to December 31, 2021, after detecting a suspicious pattern involving the front-running of trades placed by a major client, Shreekant Phumbhra, through KNA Share Brokers Pvt. Ltd.

The investigation revealed that Dilip Kumar Kanoria, who was acting as a dealer for the client, used confidential, non-public information about the client’s impending trades to execute transactions in his own and his family members’ accounts — profiting ahead of the client’s market orders.

Findings

45 front-running instances were identified, including 34 “Buy-Buy-Sell (BBS)” and 11 “Sell-Sell-Buy (SSB)” patterns.

The trades were placed seconds before the client’s large buy or sell orders, resulting in unlawful gains of ?2.85 lakh across both equity and derivatives segments.

Evidence such as call records, order timing analysis, and admissions by the dealer confirmed the misuse of confidential trading information.

SEBI found that the trades were fraudulent in nature under the Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) Regulations, 2003.

Regulatory Violations

The order concluded that the entities violated:

Section 12A(a), (b), and (c) of the SEBI Act, 1992; and

Regulations 3(a)–(d), 4(1), and 4(2)(q) of the SEBI (PFUTP) Regulations, 2003,
which prohibit employing manipulative or deceptive devices, or engaging in fraudulent trading practices in the securities market.

Penalty Imposed

After considering the magnitude of unlawful gains, the nature of violations, and mitigating factors, SEBI imposed a joint and several penalty of ?10,00,000 under Section 15HA of the SEBI Act, 1992.
The adjudicating officer noted that although the profits were modest, the act compromised market fairness and investor trust, warranting a deterrent penalty.

Key Takeaway

Front-running — trading ahead of a client’s order using confidential information — undermines the integrity of the securities market.
This order reinforces SEBI’s zero-tolerance stance against insider misuse and fraudulent market conduct.

By imposing penalties even in cases involving relatively small profits, SEBI emphasizes that market ethics and fairness are non-negotiable pillars of India’s capital market framework.

Order Reference:
Adjudication Order No. ORDER/AK/RK/2025-26/31731-31734
Date: October 27, 2025
Adjudicating Officer: Amit Kapoor
Issued by: Securities and Exchange Board of India
Source: www.sebi.gov.in