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HDFC Asset Management Company’s Assistant Vice President–Equities Mr Nilesh Kapadia, has been banned by SEBI from buying, selling or dealing in securities, directly or indirectly, or being associated with any intermediary or any entity registered with SEBI .

A SEBI order issued on Thursday also asked the AMC to not utilise the services of Mr Kapadia. The AMC has also been asked by SEBI to set up an investigation committee to examine the dealings by Mr Kapadia. The order, issued by Dr K.M Abraham, Whole Time Member, SEBI, has directed Mr Nilesh Kapadia and HDFC AMC to also jointly deposit the estimated losses amounting to Rs 2.38 crore, with the trustees of HDFC Mutual Fund.

SEBI investigations found that Mr Kapadia had tipped off an associate Mr Rajiv Ramniklal Sanghvi before placing the orders for HDFC AMC; Mr Sanghvi in turn traded based on such tips and instructions, thereby making substantial gains. The investigations conducted so far in the matter have revealed 38 instances over 24 days across BSE and NSE during April to July 2007, the SEBI order said.

Though MF investors are not directly affected by the actions of Mr. Kapadia, he indeed made a killing by front running (If HDFC Asst Management company decides to purchase for example Reliance, Mr.Kapadia buys Reliance in Huge quantity before HDFC MF buys .  When ever MF enter a company, their orders would be in crores which would push the price up. Immediately Mr. Kapadia would offload the shares and makes unethical profit – company name Reliance is used for illustrational purpose only).