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Two fund managers of Axis Mutual Fund accused of making money from front-running, know what happens?

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Axis Mutual Fund: The country’s seventh largest fund house, Axis Mutual Fund, has suspended two of its fund managers, one of whom was their main dealer. The company is now probing irregularities in the funds managed by both the fund managers.

The exact details about the kind of irregularities committed by both the fund managers will be known only after the investigation is completed. However, sources claim that both the fund managers used to do front-running.

Let us understand what is front-running and how is it different from insider trading?

In both front running and insider training cases, the criminals aim to make money in the stock market by trading in company shares. However, front-running here is a different matter from insider training. In this, the dealers or money managers working with any financial institution or mutual funds or any major stock broker try to make profit by taking advantage of the information of the day’s buy orders on behalf of their institution.

What is insider trading,

On the other hand, insider training takes place when an employee working in a company comes to know some such information, which can affect the shares of the firm and he tries to make profit by trading in the stock market by taking advantage of it.

How is money made?

The simple math of the stock market is that if a large amount of shares of a company is bought at a high price, then the price of its shares increases. Also, if there is heavy selling in the shares of a company, then its price decreases.

Mutual fund dealers take advantage of this information. Mutual funds usually buy or sell in large quantities. When this buy or sell is going to happen, the dealer is fully aware of it.

The dealers buy the shares that mutual funds are about to buy, just minutes before. Later, by buying a large amount of mutual funds, the price of that share goes up in a few minutes and they take advantage of this.

Similarly, he earns profit by selling shares of mutual funds a few minutes before selling in a stock.

SEBI rules and regulations

Till now SEBI has always imposed monetary penalty on such cases. Usually, the dealers, brokers and fund managers who are involved in this are liable to be fined.

However, in one case, SEBI has also imposed a fine on the CEO of the fund house. Given the gravity of the matter, SEBI is also known to reprimand the trustees and board of directors of the fund house.

Axis has took this action

According to the information, Axis Mutual Fund has suspended two of its fund managers – Viresh Joshi and Deepak Agarwal. At the same time, the fund managers of its 7 schemes have been changed. Such information has also been received that now SEBI is investigating this matter.

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