Overview of SEBI Findings
SEBI has revealed a major market manipulation case involving veteran operator Ketan Parekh. The scam revolved around front-running trades conducted by Tiger Global, a US-based investment firm, in shares of PB Fintech, the parent company of Policy Bazaar.
The findings, part of a 188-page SEBI order, show how Parekh collaborated with trader Rohit Salgaocar and other entities to profit from non-public trade information. Tiger Global, referred to as the ‘Big Client’ in SEBI’s order, had made significant sales of PB Fintech shares on November 11, 2022.
Stock exchange data confirmed that Tiger Global’s two funds—Tiger Global Eight Holdings and Internet Fund III Pte Ltd—were the primary entities selling these shares.
Who Is the ‘Big Client’?
The term ‘Big Client’ was initially used in SEBI’s order to maintain discretion, but subsequent stock exchange data identified the client as Tiger Global. On November 11, 2022, Tiger Global’s funds offloaded a combined 52.5 lakh shares of PB Fintech on NSE and BSE at an average price of ₹388.34 per share.
Tiger Global’s sale activities were substantial:
- Tiger Global Eight Holdings sold 76.13 lakh shares.
- Internet Fund III Pte Ltd sold 51.6 lakh shares.
In total, Tiger Global sold over 1.23 crore shares of PB Fintech during 2022, marking significant activity by the investment firm in the Indian stock market.
Details of the Manipulation
Front-running refers to the illegal practice of trading securities based on non-public knowledge of a large upcoming order. Parekh’s group exploited Tiger Global’s plans to execute their trades before the larger orders, thereby influencing the market price.
SEBI’s investigation found that Parekh and associates matched trades for over 20.61 lakh shares with the Big Client’s trades. This group included:
- GRD Securities Limited (FR1)
- Salasar Stock Broking Limited (FR2)
- Anirudh Damani (FR3)
Their coordinated actions involved buying shares sold by Tiger Global while simultaneously profiting from price movements caused by these large trades.
The Role of WhatsApp Chats
One of the most incriminating pieces of evidence in SEBI’s investigation was the WhatsApp chats retrieved from Parekh’s group. These conversations revealed a highly organized setup, where insider information was passed along and acted upon with precision.
- Before Market Hours: Discussions between Rohit Salgaocar and Tiger Global’s traders indicated plans to sell PB Fintech shares.
- 9:00–9:58 AM: Ketan Parekh issued specific sell instructions in the WhatsApp group ‘Jack-Saro’.
- 11:16 AM: Salasar Stock Broking (FR2) confirmed executing a large buy order that matched Tiger Global’s sell orders.
These chats provided a clear trail linking Parekh to the manipulation.
Implications of Front-Running
Front-running undermines market integrity by exploiting non-public information to gain an unfair advantage. It creates an uneven playing field, where a few benefit at the expense of others.
In this case, Parekh’s group leveraged insider knowledge of Tiger Global’s trades to manipulate PB Fintech’s stock price. This not only eroded investor trust but also raised questions about the effectiveness of safeguards in place to prevent such malpractice.
SEBI’s Actions
SEBI’s comprehensive investigation resulted in the identification of key entities and individuals involved in the scam. The regulator impounded ₹65.77 crore linked to these manipulative trades and issued an extensive order detailing the chronology of events.
The findings highlight the need for stricter regulations and advanced surveillance systems to prevent market manipulation. SEBI’s actions reaffirm its commitment to safeguarding market integrity and protecting investor interests.
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