On May 06, 2022, Axis Mutual Fund announced that it has suspended two of its fund managers due to potential irregularities. Axis Mutual Fund is the seventh-largest mutual fund house in India, managing assets (AUM) of over Rs 2.5 lakh crore.
The two officials that have been suspended are Viresh Joshi, Chief Trader & Fund Manager – Equity, and Deepak Agrawal, Assistant Fund Manager – Equity at Axis Mutual Fund. At the AMC, Viresh Joshi was the fund manager for Axis Banking ETF, Axis Consumption ETF, Axis Nifty ETF, Axis Technology ETF, and Axis Arbitrage Fund; whereas Deepak Agarwal managed Axis Value Fund, Axis Quant Fund, and Axis Consumption ETF.
Viresh has been associated with Axis Mutual Fund since 2009, while Deepak joined the AMC in 2015. As per media reports, the two officials have been suspended for alleged front-running in the schemes they were managing.
The fund house has now assigned the responsibility of fund management in these schemes as follows:
|Scheme Name||Existing Fund Managers||Revised Fund Managers|
|Axis Arbitrage Fund||Sachin Jain||Sachin Jain|
|Viresh Joshi||Ashish Naik|
|Devang Shah||Devang Shah|
|Axis Banking ETF||Viresh Joshi||Ashish Naik|
|Axis Nifty ETF||Ashish Naik||Ashish Naik|
|Axis Technology ETF||Jinesh Gopani||Jinesh Gopani|
|Axis Consumption ETF||Viresh Joshi||Ashish Naik|
|Axis Quant Fund||Deepak Agarwal||Ashish Naik|
|Axis Value Fund||Jinesh Gopani||Jinesh Gopani|
What is Front-running?
Front-running is a form of insider trading. It is an illegal act or a practice where the market participants deal in a security through a personal account after receiving information in advance about a large trade volume to be bought or sold. Such deals are carried ahead of the bulk buy/sell transaction to benefit from the price movement due to the bulk buy/sell transaction, even before the clients could benefit from it.
For instance, if a dealer receives a large order for buying 1 lakh shares of XYZ company. The share price of a company generally goes up when it is purchased in huge quantities. Therefore, before executing the large order, the dealer buys shares of the same company through his/her personal account to benefit from the expected rise in the share price.
Front-running is considered as one of the most serious offences by the SEBI. Last year, the regulator had barred 19 entities, including individuals, from the securities market in connection with a front-running case related to some dealers of Reliance Securities.
Axis Mutual Fund issued a statement on the matter
According to the sources, the matter is now with the mutual fund regulator SEBI and a probe has been initiated. SEBI is likely to question other officials at Axis Mutual Fund in the coming weeks.
In its tweet, Axis Mutual Fund has issued a statement that “Axis AMC has been conducting a suo motu investigation over the last two months (since February 2022). The AMC has used reputed external advisors to aid the investigation.
As part of the process, two fund managers have been suspended pending investigation of potential irregularities. We take compliance with applicable legal/regulatory requirements seriously and have zero tolerance for any instance of non-compliance.
The media is requested to not give credence to market speculation and idle gossip, which are baseless, and we strongly refute the same”.
What should investors do?
Investors should avoid any knee-jerk reaction as the investigation is still underway and Axis Mutual Fund has already sacked the concerned officials from their responsibilities.
None of the aforementioned mutual fund schemes has been recommended by PersonalFN under any of its services.
The extent of notional losses that may have occurred to the investors in these schemes can only be estimated after the probe. Investors may have to wait for further action, disclosures, and announcements from the fund house and the regulator around this matter.
We will keep our readers updated on any major development related to the matter and inform them about the portfolio action to be taken, if any.