Admissions by both tipper and tippee regarding profit-sharing for trade information establish liability for front-running.

The Securities and Exchange Board of India (SEBI) investigated suspicious trading activity between January 2022 and June 2023.

The investigation revealed that Ashish Sarda, a dealer at Thar Share Brokers, acted as an "information carrier" by tipping his cousin, Vikas Sarda, regarding the large-scale trades of "Big Clients".

Based on this non-public information, Vikas Sarda executed front-running trades in his own name, his wife’s (Preeti Sarda) name, and his HUF account, generating a profit of ₹1.27 Crore.

Bank records showed weekly "commission" payments of approximately ₹13.8 Lakhs from the Appellants to Ashish Sarda.

On November 28, 2024, the Quasi-Judicial Authority (QJA) ordered disgorgement of ₹1.43 Crore (including interest), debarment from the market, and a penalty of ₹5 Lakhs per appellant under Section 15HA of the SEBI Act.

The Appellants challenged this order, alleging a lack of evidence of fraud and the denial of cross-examination.

1. Whether the Appellants engaged in fraudulent front-running activity based on confidential information in violation of PFUTP Regulations.

2. Whether the non-granting of an opportunity to cross-examine the information carrier (Ashish Sarda) vitiated the proceedings.

3. Whether the penalties and disgorgement directions imposed were disproportionate or illegal.

The Tribunal primarily applied Section 15HA of the SEBI Act, 1992, which prescribes penalties for fraudulent and unfair trade practices.

It also relied on the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations ("PFUTP Regulations"), which prohibit "front-running"—the practice of trading in securities ahead of a large order to profit from the subsequent price movement.

Regarding evidence, the Tribunal shifts from the strict "proof beyond reasonable doubt" standard found in criminal law to a "preponderance of probabilities" supported by direct admissions and circumstantial evidence like Call Data Records (CDRs) and bank statements.

The Tribunal rejected the Appellants' defense by highlighting the "critical admissions" made by both the 'tipper' and the 'tippee' during the investigation.

It noted that Ashish Sarda admitted on oath to sharing trade details of big clients in exchange for a 60:40 profit-sharing arrangement.

Crucially, Vikas Sarda corroborated this in his own statement, admitting he received tips and paid weekly commissions.

The Tribunal held that since Vikas Sarda admitted to the modus operandi, the demand for cross-examination of Ashish Sarda was redundant and an afterthought, especially as it was not requested during the initial adjudication.

The financial nexus (weekly transfers) and the synchronization of trades with the "Big Clients" provided undeniable evidence of front-running.

The Tribunal found that the conduct was unethical and fraudulent under PFUTP Regulations.

It held that the admissions of the parties, bolstered by CDRs and bank statements, sufficiently proved front-running.

The Tribunal ruled that the penalty of ₹5 Lakhs per appellant was the statutory minimum under Section 15HA and therefore could not be considered excessive.

The directions for disgorgement of ₹1.43 Crore on a joint and several basis and market debarment were sustained.

No costs were awarded.