Front-Running Explained — With Indian Cases

That's the textbook answer. The interesting part is what it actually looks like in practice — and how often it's been caught here.

In the last decade, SEBI has cracked down on front-running rings inside HDFC AMC, Axis Mutual Fund, LIC, PNB MetLife, Reliance Securities, and most recently, a star TV market commentator from IIFL Securities. The names keep changing. The pattern doesn't.

So let me walk you through what front-running really is, why it should make every retail investor a little angry, and what the most famous Indian cases actually looked like.

What front-running actually is

Imagine you're a dealer at a large mutual fund. Around 10:45 a.m., the fund manager tells you: "Buy 5 lakh shares of XYZ Ltd, market order, full position, today." A buy order that size will move the price up — there simply aren't 5 lakh shares sitting on the bid waiting to be filled at the current price.

Now imagine, between getting that instruction and actually placing the order, you message a friend: "Buy XYZ. Now." Your friend buys 5,000 shares at ₹500. You then place the fund's order.

The fund's buying drives the price to ₹503. Your friend sells at ₹502.50, makes ₹12,500, and you split it later.

That is front-running. The fund got a worse price (its average fill is now higher because of your friend's buying), and your friend pocketed the difference. Multiply this across hundreds of trades over months or years, and you get the cases SEBI has been busting.

SEBI's working definition is in Regulation 4(2)(q) of the PFUTP Regulations, 2003 — any trade placed while in possession of non-public information about a substantial impending transaction. Three ingredients: material non-public information, a substantial transaction coming, and the order is executed in advance of that transaction.

Across SEBI's orders, there's a recurring three-role structure that makes the mechanics easier to follow:

The Big Client is the legitimate buyer or seller — usually an AMC, an insurance company, or an FII. The Information Carrier sits between the Big Client and the market: typically a dealer at the AMC or a sales trader at the broker. The Front Runner is the trading account that actually executes the abusive trades, often belonging to a relative, a friend's HUF, or a shell entity.

This three-role structure is straight from SEBI's 2020 Reliance Securities order and has been the template for every front-running case since.

Why this hurts you, even if you don't trade

Most front-running cases involve someone running ahead of mutual funds, insurance companies, and FIIs. So your first reaction might be — this is just big institutions stealing from each other, why should I care?

Here's why. If you own a single SIP in any large equity mutual fund (Axis Bluechip, HDFC Top 100, ICICI Prudential Bluechip), you are the institution. Your money is what the fund is buying with. Every rupee the dealer's friend skimmed off the top came out of your NAV.

Each individual loss is microscopic. A 10-paisa worse fill on a ₹500 stock, across thousands of trades, year after year. You'll never see it on your statement.

But across the industry, the leakage adds up to hundreds of crores of unit-holder money quietly transferred to the dealer's brother-in-law's HUF account. Axis MF alone has over ₹2.7 lakh crore in AUM.

The PNB MetLife case from December 2024 ran for more than three years before it was caught. The HDFC Mutual Fund dealer Nilesh Kapadia was associated with the AMC for about a decade, but SEBI's documented front-running findings related to specific investigated periods, including 38 instances over April–July 2007 alone. That's how long retail money can quietly leak before the surveillance picks it up. And it usually picks it up only when an internal whistleblower or a tax department raid happens to stumble onto the trail.

Figures from SEBI orders and exchange filings as reported by Business Standard, Moneylife, Mint, and BusinessToday.

Major Front-Running Cases in India

Here are the cases worth knowing. Each one was chosen not because it was the largest, but because it shows a different flavour of how this works in practice.

1. HDFC AMC — Nilesh Kapadia (2007–2010)

The case that put front-running on the Indian regulator's radar. Nilesh Kapadia was the equities dealer at HDFC Asset Management Company from June 2000 to 2010. He routinely tipped off his college mate Rajiv Sanghvi from the dealer-room phone before placing HDFC MF's orders.

SEBI documented 38 instances of front-running over just April–July 2007 alone. Kapadia and the AMC were ordered to deposit ₹2.38 crore back to the trustees of HDFC MF — money that was supposed to belong to the unit-holders. A later 2016 disgorgement order raised that to ₹3.35 crore as more years of trading came under the lens.

The detection clue was almost embarrassingly old-school. HDFC's own executives recognised Kapadia's voice on call recordings of dealer-room conversations with Sanghvi's mobile number. Front-running, in 2007, did not yet require encrypted apps to get caught.

2. Passport India — Dipak Patel (2007–2009)

The legally most important Indian front-running case, because it set the precedent. Dipak Patel was the portfolio manager at Passport India Investments (Mauritius), a sub-account of San Francisco-based FII Passport Capital. He passed advance information about Passport India's trades to his cousins, Kanaiyalal and Anandkumar Patel, who placed orders just ahead of the FII and squared off when the FII's orders moved the price.

SEBI documented 799 trades on NSE alone with matching patterns. The cousins were ordered to disgorge ₹1.12 crore. Then, in 2012, the Securities Appellate Tribunal threw out the order on a narrow technicality. The existing Regulation 4(2)(q) only prohibited front-running by intermediaries, and the cousins, as individual traders, did not qualify.

This was a massive loophole. It took the Supreme Court's 2017 reversal in SEBI v. Kanaiyalal Baldevbhai Patel to close the gap, confirming that even non-intermediaries can be held liable under the broader anti-fraud provisions of the SEBI Act.

SEBI then amended the FUTP Regulations in 2013 to make this explicit. Without this case, the bigger ones that followed would have been much harder to prosecute.

3. Axis Mutual Fund — Viresh Joshi (2022)

The biggest Indian front-running case to date, and the one that finally forced SEBI into structural reform. Viresh Joshi was the Chief Dealer at Axis Mutual Fund, with access to non-public information about impending fund trades for one of India's largest AMCs.

The trail started not with surveillance but with social media. Joshi's lifestyle didn't match his salary — 14 apartments across Mumbai, luxury cars, holiday homes. People started talking on Twitter.

SEBI was eventually tipped off, in early 2022, by a whistleblower flagging unusual trading patterns. Axis suspended Joshi in May 2022.

SEBI's 2023 order alleged Joshi had used Bloomberg chat terminal and Apple FaceTime to send tips to brokers, who placed front-running trades for him. The regulator barred Joshi and 20 others and alleged wrongful gains of ₹30.56 crore across 21 entities, with proceeds allegedly siphoned through a Dubai-based company. The Enforcement Directorate is now running a separate FEMA and money-laundering case in parallel.

This is the case where the modern toolkit becomes visible: encrypted enterprise chat, family-controlled trading accounts, foreign shell companies. The dealer-room phone-call era was over.

4. LIC — Yogesh Garg (2023)

A reminder that this isn't just a mutual fund problem. Yogesh Garg was an Administrative Officer in the investment department at LIC, the country's largest institutional investor. He was front-running LIC's trades through the accounts of his mother, mother-in-law, and two HUFs at the same address and phone number.

SEBI's April 2023 interim order impounded ₹2.44 crore in unlawful gains and barred all five entities. The KYC linkages were the quickest evidentiary trail: a common address, a common phone number, family relationships. LIC subsequently terminated Garg's services.

The number is small compared to Axis MF. The principle is identical.

5. PNB MetLife — Sachin Dagli (2024)

The largest single-individual case after Axis. Sachin Bakul Dagli was the equity dealer at PNB MetLife India Insurance. His brother Tejas Dagli worked as an equity sales trader at Investec. SEBI alleged the brothers funnelled non-public information about both PNB MetLife and Investec's institutional clients to a network that placed front-running trades through three accounts: Dhanmata Realty, Worthy Distributors, and an individual named Pragnesh Sanghvi.

SEBI's December 2024 interim order impounded ₹21.16 crore in alleged unlawful gains and noted that the activity had run for "more than three years" between January 2021 and July 2024. Three years of alleged front-running, hidden inside the trade flow of a single insurance company, until the surveillance system finally found the pattern.

6. Sanjiv Bhasin (IIFL Securities) — the TV pump-and-dump (2025)

The newest variant, and the one most relevant to the average retail investor. Sanjiv Bhasin was a former director and later consultant at IIFL Securities and a regular guest on Zee Business, ET Now, and other business channels. He was, for a decade, one of the most-watched stock recommenders on Indian TV.

SEBI's June 2025 interim order alleged a textbook pump-and-dump variant of front-running. The regulator's allegation: Bhasin, through related entities like Venus Portfolios, Gemini Portfolios, HB Stockholdings and Leo Portfolios, bought stocks first, then went on TV and Telegram channels to recommend them, then sold into the rally those recommendations created. SEBI flagged ₹11.37 crore in alleged unlawful gains across stocks like LTTS, Parag Milk, IndiGo, SAIL, and Godrej Consumer. Bhasin has approached the Securities Appellate Tribunal contesting the order.

The Big Client here was the retail audience. The information being front-run was the recommendation itself — a recommendation built to move retail money. If you ever bought a stock the morning after a TV expert called it a "buy," you might have been on the other side of this trade.

If you ever bought a stock the morning after a TV expert called it a buy, you might have been on the other side of this trade.

— on the Sanjiv Bhasin case

How SEBI is fighting back

The legal teeth are already there. Section 12A of the SEBI Act and Regulation 4(2)(q) of the PFUTP Regulations make front-running a fraudulent and unfair trade practice. The penalty is severe: up to ₹25 crore or three times the profits made, whichever is higher, plus market bans, disgorgement of gains with 12% interest, and in serious cases, parallel criminal proceedings under the Prevention of Money Laundering Act.

What was missing, until very recently, was systematic detection at source. Most cases were caught through whistleblowers, tax raids, or trade-pattern surveillance years after the fact. By then, the leakage had already happened.

That changed with SEBI's August 5, 2024 circular, issued in the wake of Axis MF and LIC. It now requires every Asset Management Company to put in place an institutional mechanism: alert-based surveillance systems, internal control procedures, whistleblower policies, escalation protocols, with the AMC's CEO and Chief Compliance Officer personally accountable for it. Stock exchanges and depositories are also being roped in to share trade-related data with AMCs in real time.

Whether this stops front-running or just pushes it into harder-to-detect channels (private chats, third-party tippers, foreign accounts) is going to be the next decade's story.

What retail can actually do about it

Honest answer? Not much, directly. You're not going to spot a Bloomberg-chat tip-off from your trading screen. Front-running detection is the regulator's job, the AMC's job, and the broker's job, not yours.

But there are three habits that protect you.

One. Be skeptical of TV stock tips, especially ones that arrive with conviction and a price target. The Sanjiv Bhasin case is not unique; it's the visible tip of an iceberg. Any time a "market expert" recommends a small or mid-cap stock with sudden urgency on prime time, ask the obvious question: did they buy it before they came on air?

Two. When a stock you own moves sharply on no news, look at the volume. Front-running and other manipulation almost always show up as unusual volume spikes ahead of a public catalyst. Spotting unusual volume isn't proof of anything, but it teaches you to question the price action instead of trusting it.

Three. Pick funds and brokers with strong compliance reputations, not just star returns. Star fund managers are exactly the profile that has been involved in most of the recent cases. Reputation, board independence, and SEBI's track record on the AMC matter more than last year's NAV chart.