Settlement with Sebi in ‘mirror trading’ case sparks a debate
Mumbai: A recent instance where a senior official of a broking firm settled a case with the Securities and Exchange Board of India (Sebi) for ‘mirror trading’ has sparked a debate over the legitimacy of such transactions. Mirror trading is a technique that allows an individual to copy the trade of another on a real-time basis. Mumbai-based Aequitas Investment Consultancy, a money manager run by Siddhartha Bhaiya, had alleged that Pawan Agarwal, a broker, executed trades for the fund as its broker while carrying out mirror trading.
Aequitas filed a complaint with Sebi against Agrawal alleging it amounted to front-running. After the Sebi investigation, Agarwal filed a settlement application, which involves an out-of-court resolution of securities law violations negotiated between the regulator and the entity concerned without admission of guilt. It involves the payment of a fee.
The settlement mechanism is a discretionary exercise on the part of the regulator. Under the settlement mechanism, Agarwal paid 45.99 lakh. Sebi said in an order dated July 5 said its investigation revealed no instances of front-running by Agarwal, but it observed that he had violated the provisions under the Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) Regulations.
Sebi held that mirror trading violates certain provisions of these regulations. Lawyers said the case has sparked discussions on mirror trading in legal circles. “It is worth noting that mirror trading has not been widely discussed in India before,” said Siddharth Mody, partner at J Sagar Associates.
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