Front-running - SEBI Ready Reckoner - SEBI

Definitions and meanings of front-running Major Law Lexicon by P. Ramanatha Aiyar (4 th Ed. (2010)- FRONT RUNNING . - Buying or selling securities ahead of a large order so as to benefit from the subsequent price move. This denotes persons dealing in the market, knowing that a large transaction will take place in the near future and the parties are likely to move in their favour. The illegal private trading by a broker or market maker who has prior knowledge of a forthcoming large movement in prices The Black s Law dictionary (9 th Ed.) Front running , n. Securities. A broker s or analyst s use of non-public information to acquire securities or enter into options or futures contracts for his or her own benefit, knowing that when the information becomes public, the price of the securities will change in a predictable manner. This practice is illegal. Front-running can occur in many ways. For example, a broker or analyst who works for a brokerage firm may buy shares in a company that the firm is about to recommend as a strong buy or in which the firm is planning to buy a large block of shares. SEBI has defined front-running in one of its circular (Circular CIR/EFD/1/2012, dated 25.05.2012.) in the following manner- Front-running ; for the purpose of this circular, front running means usage of non public information to directly or indirectly, buy or sell securities or enter into options or futures contracts, in advance of a substantial order, on an impending transaction, in the same or related securities or futures or options contracts, in anticipation that when the information becomes public; the price of such securities or contracts may change. SECURITIES AND EXCHANGE BOARD OF INDIA VERSUS SHRI KANAIYALAL BALDEVBHAI PATEL, SECURITIES AND EXCHANGE BOARD OF INDIA VERSUS SHRI DIPAK PATEL - 2017 (9) TMI 1269 - SUPREME COURT